false2021Q20001169770December 31http://fasb.org/us-gaap/2021-01-31#AccountingStandardsUpdate201613MemberP4YP10YP1YP3YP5YP7YP10YP10Y0.0250.025
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20212022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 001-35522
BANC OF CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
04-3639825
(IRS Employer Identification No.)
3 MacArthur Place, Santa Ana, California
(Address of principal executive offices)
92707
(Zip Code)
(855) 361-2262
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes  No 


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Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBANCNew York Stock Exchange
Depositary Shares each representing a 1/40th interest in a share of 7.00% Non-Cumulative Perpetual Preferred Stock, Series EBANC PRENew York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
As of August 4, 2021,2022, the registrant had outstanding 50,314,97659,502,549 shares of voting common stock and 477,321 shares of Class B non-voting common stock.


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BANC OF CALIFORNIA, INC.
FORM 10-Q QUARTERLY REPORT
June 30, 20212022
Table of Contents
Page
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Forward-Looking Statements -
When used in this report and in documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California, Inc. and its affiliates (“BANC,” the “Company”, “we”, “us” or “our”), as well as the continuing effects of the COVID-19 pandemic on the Company’s business, operations, financial performance and prospects.. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:
i.the continuing effects of the COVID-19 pandemic and steps taken by governmental and other authorities to contain, mitigate and combat the pandemic on our business, operations, financial performance and prospects;
ii.the costs and effects of litigation, generally, including legal fees and other expenses, settlements and judgments;
iii.the risk that we will not be successful in the implementation of our capital utilization strategy, new lines of business, new products and services, or other strategic project initiatives;
iv.risks that the Company’s merger and acquisition transactions may disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies, and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all;
v.the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including but not limited to, the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and nonperforming assets in our loan portfolio, and may result in our allowance for credit losses not being adequate and require us to materially increase our credit loss reserves;
vi.the quality and composition of our securities portfolio;
vii.changes in general economic conditions, either nationally or in our market areas, including any impact of supply chain disruptions, or changes in financial markets;markets, and the risk of recession;
viii.continuation of, or changes in the short-term interest rate environment changes in theand levels of general interest rates, volatilityincluding the recent and anticipated increases by the FRB in its benchmark rate, the interest rate environment,impacts of inflation, the relative differences between short- and long-term interest rates, deposit interest rates, and their impact on our net interest margin, tangible book value, and the cost of funding sources;
ix.fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area;
x.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;
xi.results of examinations of us by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, restrict our ability to invest in certain assets, increase our allowance for credit losses, write-downresult in write-downs of asset values, increase our capital levels, affect our ability to borrow funds or maintain or increase deposits, or impose fines, penalties or sanctions, any of which could adversely affect our liquidity and earnings;
xii.legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;
xiii.our ability to control operating costs and expenses;
xiv.staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;
xv.the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;
xvi.errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;
xvii.uncertainty regarding the expected discontinuation of the London Interbank Offered Rate (“LIBOR”) and the use of alternative reference rates;
xviii.failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including but not limited to, due to cybersecurity threats;
xviii.xix.our ability to attract and retain key members of our senior management team;
xix.xx.increased competitive pressures among financial services companies;
xx.xxi.changes in consumer spending, borrowing and saving habits;
xxi.xxii.the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business;
xxii.xxiii.the ability of key third-party providers to perform their obligations to us;
xxiii.xxiv.changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting standards;
xxiv.xxv.continuing impact of the Financial Accounting Standards Board’s credit loss accounting standard, referred to as Current Expected Credit Loss, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses;
xxv.xxvi.share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common sharesstock and attempting to generate negative publicity about us;
xxvi.xxvii.our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or our bank subsidiary, or repurchases of our common or preferred stock; and
xxvii.xxviii.other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC, including, without limitation, the risks described under “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.

Further, statements about the potential effects of the proposed acquisition of Pacific Mercantile Bancorp (“PMBC”) on our business, financial results and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including (i) the possibility that the merger does not close when expected or at all because required regulatory or other approvals, financial tests or other conditions to closing are not received or satisfied on a timely basis or at all; (ii) changes in BANC’s or PMBC’s stock price before closing, including as a result of its financial performance prior to closing, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies; (iii) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which BANC and PMBC operate; (iv) the ability to promptly and effectively integrate the businesses of BANC and PMBC; (v) the reaction to the transaction of the companies’ customers, employees and counterparties; (vi) diversion of management time on merger-related issues; (vii) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (viii) other risks that are described in BANC’s and PMBC’s public filings with the SEC.
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PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Amounts in thousands, except share and per share data)
(Unaudited)
June 30,
2021
December 31,
2020
June 30,
2022
December 31,
2021
ASSETSASSETSASSETS
Cash and due from banksCash and due from banks$28,166 $38,330 Cash and due from banks$43,736 $41,729 
Interest-earning deposits in financial institutionsInterest-earning deposits in financial institutions135,166 182,489 Interest-earning deposits in financial institutions199,328 186,394 
Total cash and cash equivalentsTotal cash and cash equivalents163,332 220,819 Total cash and cash equivalents243,064 228,123 
Securities held-to-maturity, at amortized cost (fair value of $285,672 at June 30, 2022)Securities held-to-maturity, at amortized cost (fair value of $285,672 at June 30, 2022)329,272 — 
Securities available-for-sale, at fair valueSecurities available-for-sale, at fair value1,353,154 1,231,431 Securities available-for-sale, at fair value865,435 1,315,703 
Loans held-for-sale, carried at fair value2,853 1,413 
Loans receivableLoans receivable5,985,477 5,898,405 Loans receivable7,451,264 7,251,480 
Allowance for loan lossesAllowance for loan losses(75,885)(81,030)Allowance for loan losses(93,793)(92,584)
Loans receivable, netLoans receivable, net5,909,592 5,817,375 Loans receivable, net7,357,471 7,158,896 
Federal Home Loan Bank and other bank stock, at costFederal Home Loan Bank and other bank stock, at cost44,569 44,506 Federal Home Loan Bank and other bank stock, at cost51,489 44,632 
Other real estate owned, net3,253 
Premises and equipment, netPremises and equipment, net118,649 121,520 Premises and equipment, net108,523 112,868 
Bank owned life insuranceBank owned life insurance113,168 111,807 Bank owned life insurance125,326 123,720 
Operating lease right-of-use assetsOperating lease right-of-use assets20,364 19,633 Operating lease right-of-use assets32,632 35,442 
Investments in alternative energy partnerships, netInvestments in alternative energy partnerships, net24,068 27,977 Investments in alternative energy partnerships, net23,531 25,888 
Deferred income taxes, netDeferred income taxes, net41,628 45,957 Deferred income taxes, net54,455 50,774 
Income tax receivableIncome tax receivable4,563 7,952 
GoodwillGoodwill37,144 37,144 Goodwill95,127 94,301 
Other intangible assets, netOther intangible assets, net2,069 2,633 Other intangible assets, net4,677 6,411 
Other assetsOther assets193,570 195,119 Other assets206,548 189,033 
Total assetsTotal assets$8,027,413 $7,877,334 Total assets$9,502,113 $9,393,743 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing depositsNoninterest-bearing deposits$1,808,918 $1,559,248 Noninterest-bearing deposits$2,826,599 $2,788,196 
Interest-bearing depositsInterest-bearing deposits4,397,626 4,526,552 Interest-bearing deposits4,732,084 4,651,239 
Total depositsTotal deposits6,206,544 6,085,800 Total deposits7,558,683 7,439,435 
Federal Home Loan Bank advances, netFederal Home Loan Bank advances, net490,419 539,795 Federal Home Loan Bank advances, net511,695 476,059 
Other borrowingsOther borrowings125,000 Other borrowings98,000 25,000 
Long-term debt, netLong-term debt, net256,554 256,315 Long-term debt, net274,587 274,386 
Reserve for loss on repurchased loansReserve for loss on repurchased loans5,095 5,515 Reserve for loss on repurchased loans3,222 4,348 
Operating lease liabilitiesOperating lease liabilities21,588 20,647 Operating lease liabilities37,500 40,675 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities92,851 72,055 Accrued expenses and other liabilities69,296 68,550 
Total liabilitiesTotal liabilities7,198,051 6,980,127 Total liabilities8,552,983 8,328,453 
Commitments and contingent liabilitiesCommitments and contingent liabilities00Commitments and contingent liabilities00
Preferred stockPreferred stock94,956 184,878 Preferred stock— 94,956 
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,724,192 shares issued and 50,313,228 shares outstanding at June 30, 2021; 52,178,453 shares issued and 49,767,489 shares outstanding at December 31, 2020527 522 
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2021 and at December 31, 2020
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 64,725,426 shares issued and 59,985,736 shares outstanding at June 30, 2022; 64,599,170 shares issued and 62,188,206 shares outstanding at December 31, 2021Common stock, $0.01 par value per share, 446,863,844 shares authorized; 64,725,426 shares issued and 59,985,736 shares outstanding at June 30, 2022; 64,599,170 shares issued and 62,188,206 shares outstanding at December 31, 2021647 646 
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2022 and at December 31, 2021Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2022 and at December 31, 2021
Additional paid-in capitalAdditional paid-in capital630,654 634,704 Additional paid-in capital856,079 854,873 
Retained earningsRetained earnings129,307 110,179 Retained earnings210,471 147,894 
Treasury stock, at cost (2,410,964 and 2,410,964 shares at June 30, 2021 and December 31, 2020)(40,827)(40,827)
Accumulated other comprehensive income, net14,740 7,746 
Treasury stock, at cost (4,739,690 and 2,410,964 shares at June 30, 2022 and December 31, 2021)Treasury stock, at cost (4,739,690 and 2,410,964 shares at June 30, 2022 and December 31, 2021)(84,013)(40,827)
Accumulated other comprehensive (loss) income, netAccumulated other comprehensive (loss) income, net(34,059)7,743 
Total stockholders’ equityTotal stockholders’ equity829,362 897,207 Total stockholders’ equity949,130 1,065,290 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$8,027,413 $7,877,334 Total liabilities and stockholders’ equity$9,502,113 $9,393,743 
See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months EndedSix Months Ended
June 30,
Three Months EndedSix Months Ended
June 30,
June 30,
2021
March 31,
2021
June 30,
2020
20212020June 30,
2022
March 31,
2022
June 30,
2021
20222021
Interest and dividend incomeInterest and dividend incomeInterest and dividend income
Loans, including feesLoans, including fees$61,900 $61,345 $63,642 $123,245 $129,176 Loans, including fees$78,895 $76,234 $61,900 $155,129 $123,245 
SecuritiesSecurities6,986 6,501 7,816 13,487 15,636 Securities8,124 7,309 6,986 15,433 13,487 
Other interest-earning assetsOther interest-earning assets791 772 1,239 1,563 2,599 Other interest-earning assets1,399 726 791 2,125 1,563 
Total interest and dividend incomeTotal interest and dividend income69,677 68,618 72,697 138,295 147,411 Total interest and dividend income88,418 84,269 69,677 172,687 138,295 
Interest expenseInterest expenseInterest expense
DepositsDeposits3,543 4,286 10,205 7,829 24,816 Deposits3,180 1,388 3,543 4,568 7,829 
Federal Home Loan Bank advancesFederal Home Loan Bank advances2,944 3,112 4,818 6,056 10,701 Federal Home Loan Bank advances3,114 2,953 2,944 6,067 6,056 
Securities sold under repurchase agreements
Long-term debt and other interest-bearing liabilitiesLong-term debt and other interest-bearing liabilities3,343 3,304 2,357 6,647 4,716 Long-term debt and other interest-bearing liabilities3,825 3,487 3,343 7,312 6,647 
Total interest expenseTotal interest expense9,830 10,702 17,382 20,532 40,235 Total interest expense10,119 7,828 9,830 17,947 20,532 
Net interest incomeNet interest income59,847 57,916 55,315 117,763 107,176 Net interest income78,299 76,441 59,847 154,740 117,763 
(Reversal of) provision for credit losses(Reversal of) provision for credit losses(2,154)(1,107)11,826 (3,261)27,587 (Reversal of) provision for credit losses— (31,542)(2,154)(31,542)(3,261)
Net interest income after (reversal of) provision for credit lossesNet interest income after (reversal of) provision for credit losses62,001 59,023 43,489 121,024 79,589 Net interest income after (reversal of) provision for credit losses78,299 107,983 62,001 186,282 121,024 
Noninterest incomeNoninterest incomeNoninterest income
Customer service feesCustomer service fees1,990 1,758 1,224 3,748 2,320 Customer service fees2,578 2,434 1,990 5,012 3,748 
Loan servicing incomeLoan servicing income38 268 95 306 170 Loan servicing income109 212 38 321 306 
Income from bank owned life insuranceIncome from bank owned life insurance690 672 591 1,362 1,169 Income from bank owned life insurance810 796 690 1,606 1,362 
Net gain on sale of securities available-for-saleNet gain on sale of securities available-for-sale2,011 2,011 Net gain on sale of securities available-for-sale— 16 — 16 — 
Fair value adjustment for loans held-for-sale20 25 20 (1,561)
Net loss on sale of loans(27)
Other incomeOther income1,432 1,683 1,582 3,115 3,507 Other income3,689 2,452 725 6,141 2,836 
Total noninterest incomeTotal noninterest income4,170 4,381 5,528 8,551 7,589 Total noninterest income7,186 5,910 3,443 13,096 8,252 
Noninterest expenseNoninterest expenseNoninterest expense
Salaries and employee benefitsSalaries and employee benefits25,042 25,719 24,260 50,761 47,696 Salaries and employee benefits28,264 28,987 25,042 57,251 50,761 
Naming rights termination26,769 26,769 
Occupancy and equipmentOccupancy and equipment7,277 7,196 7,090 14,473 14,333 Occupancy and equipment7,876 7,855 7,277 15,731 14,473 
Professional feesProfessional fees1,749 4,022 4,596 5,771 10,560 Professional fees4,107 2,907 1,749 7,014 5,771 
Data processingData processing1,621 1,655 1,536 3,276 3,309 Data processing1,782 1,828 1,621 3,610 3,276 
Advertising and promotion78 118 1,157 196 2,913 
Regulatory assessmentsRegulatory assessments769 774 725 1,543 1,209 Regulatory assessments1,021 775 769 1,796 1,543 
(Gain) loss on investments in alternative energy partnerships(829)3,630 (167)2,801 1,738 
Loss (gain) on investments in alternative energy partnershipsLoss (gain) on investments in alternative energy partnerships1,043 158 (829)1,201 2,801 
Reversal of provision for loan repurchasesReversal of provision for loan repurchases(99)(132)(34)(231)(634)Reversal of provision for loan repurchases(490)(471)(99)(961)(231)
Amortization of intangible assetsAmortization of intangible assets282 282 430 564 859 Amortization of intangible assets313 441 282 754 564 
Merger-related costsMerger-related costs700 700 1,400 Merger-related costs— — 700 — 1,400 
All other expenseAll other expense3,969 2,771 6,408 6,740 10,937 All other expense4,696 4,116 3,320 8,812 6,637 
Total noninterest expenseTotal noninterest expense40,559 46,735 72,770 87,294 119,689 Total noninterest expense48,612 46,596 39,832 95,208 86,995 
Income (loss) from operations before income taxes25,612 16,669 (23,753)42,281 (32,511)
Income tax expense (benefit)6,562 2,294 (5,304)8,856 (7,469)
Income from operations before income taxesIncome from operations before income taxes36,873 67,297 25,612 104,170 42,281 
Income tax expenseIncome tax expense10,161 18,785 6,562 28,946 8,856 
Net income (loss)19,050 14,375 (18,449)33,425 (25,042)
Net incomeNet income26,712 48,512 19,050 75,224 33,425 
Preferred stock dividendsPreferred stock dividends1,727 3,141 3,442 4,868 6,975 Preferred stock dividends— 1,420 1,727 1,420 4,868 
Income allocated to participating securitiesIncome allocated to participating securities62 122 Income allocated to participating securities— — — — 122 
Participating securities dividends94 188 
Impact of preferred stock redemptionImpact of preferred stock redemption3,347 (49)3,347 (575)Impact of preferred stock redemption— 3,747 — 3,747 3,347 
Net income (loss) available to common stockholders$17,323 $7,825 $(21,936)$25,088 $(31,630)
Earnings (loss) per common share:
Net income available to common stockholdersNet income available to common stockholders$26,712 $43,345 $17,323 $70,057 $25,088 
Earnings per common share:Earnings per common share:
BasicBasic$0.34 $0.16 $(0.44)$0.50 $(0.63)Basic$0.44 $0.69 $0.34 $1.13 $0.50 
DilutedDiluted$0.34 $0.15 $(0.44)$0.49 $(0.63)Diluted$0.43 $0.69 $0.34 $1.13 $0.49 
Earnings (loss) per class B common share:
Earnings per class B common share:Earnings per class B common share:
BasicBasic$0.34 $0.16 $(0.44)$0.50 $(0.63)Basic$0.44 $0.69 $0.34 $1.13 $0.50 
DilutedDiluted$0.34 $0.15 $(0.44)$0.50 $(0.63)Diluted$0.44 $0.69 $0.34 $1.13 $0.50 
See accompanying notes to consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 30,
June 30,
2021
March 31,
2021
June 30,
2020
20212020
Net income (loss)$19,050 $14,375 $(18,449)$33,425 $(25,042)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities:
Unrealized gain (loss) arising during the period9,555 (2,561)40,002 6,994 (2,246)
Reclassification adjustment for gain included in net income (loss)(1,419)(1,419)
Total change in unrealized gain (loss) on available-for-sale securities9,555 (2,561)38,583 6,994 (3,665)
Total other comprehensive income (loss)9,555 (2,561)38,583 6,994 (3,665)
Comprehensive income$28,605 $11,814 $20,134 $40,419 $(28,707)
Three Months EndedSix Months Ended
June 30,
June 30,
2022
March 31,
2022
June 30,
2021
20222021
Net income$26,712 $48,512 $19,050 $75,224 $33,425 
Other comprehensive (loss)/income, net of tax:
Unrealized (loss) gain on available-for-sale securities:
Unrealized (loss) gain arising during the period(15,113)(26,913)9,555 (42,026)6,994 
Reclassification adjustment for gain included in net income— (11)— (11)— 
Total change in unrealized (loss) gain on available-for-sale securities(15,113)(26,924)9,555 (42,037)6,994 
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity226 — 235 — 
Total other comprehensive (loss)/income(14,887)(26,915)9,555 (41,802)6,994 
Comprehensive income$11,825 $21,597 $28,605 $33,422 $40,419 

See accompanying notes to consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)thousands, except share and per share data)
(Unaudited)
Preferred StockCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' EquityPreferred StockCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
VotingClass B
Non-Voting
VotingClass B
Non-Voting
Three Months Ended June 30, 2021
Balance at March 31, 2021$94,956 $526 $5 $629,844 $115,004 $(40,827)$5,185 $804,693 
Three Months Ended June 30, 2022Three Months Ended June 30, 2022
Balance at March 31, 2022Balance at March 31, 2022$ $646 $5 $855,198 $187,457 $(45,125)$(19,172)$979,009 
Comprehensive income:Comprehensive income:Comprehensive income:
Net incomeNet income— — — — 19,050 — — 19,050 Net income— — — — 26,712 — — 26,712 
Other comprehensive income, net— — — — — — 9,555 9,555 
Other comprehensive loss, netOther comprehensive loss, net— — — — — — (14,887)(14,887)
Issuance of common stockIssuance of common stock— — (1)— — — Issuance of common stock— — (1)— — — — 
Purchase of 2,113,176 shares of treasury stockPurchase of 2,113,176 shares of treasury stock— — — — — (38,888)— (38,888)
Share-based compensation expenseShare-based compensation expense— — — 1,338 — — — 1,338 Share-based compensation expense— — — 1,482 — — — 1,482 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability— — — (527)— — — (527)Restricted stock surrendered due to employee tax liability— — — (600)— — — (600)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan— — — — (30)— — (30)Shares purchased under the Dividend Reinvestment Plan— — — — (30)— — (30)
Dividends declared ($0.06 per common share)Dividends declared ($0.06 per common share)— — — — (2,990)— — (2,990)Dividends declared ($0.06 per common share)— — — — (3,668)— — (3,668)
Preferred stock dividendsPreferred stock dividends— — — — (1,727)— — (1,727)Preferred stock dividends— — — — — — — — 
Balance at June 30, 2021$94,956 $527 $5 $630,654 $129,307 $(40,827)$14,740 $829,362 
Balance at June 30, 2022Balance at June 30, 2022$ $647 $5 $856,079 $210,471 $(84,013)$(34,059)$949,130 
Three Months Ended June 30, 2020
Balance at March 31, 2020$187,687 $520 $5 $631,125 $110,640 $(40,827)$(54,148)$835,002 
Three Months Ended June 30, 2021Three Months Ended June 30, 2021
Balance at March 31, 2021Balance at March 31, 2021$94,956 $526 $5 $629,844 $115,004 $(40,827)$5,185 $804,693 
Comprehensive (loss) income:
Net loss— — — — (18,449)— — (18,449)
Other comprehensive income, net— — — — — — 38,583 38,583 
Comprehensive income:Comprehensive income:
Net incomeNet income— — — — 19,050 — — 19,050 
Other comprehensive gain, netOther comprehensive gain, net— — — — — — 9,555 9,555 
Issuance of common stockIssuance of common stock— — (2)— — — Issuance of common stock— — (1)— — — — 
Redemption of preferred stock(2,650)— — — 49 — — (2,601)
Share-based compensation expenseShare-based compensation expense— — — 1,470 — — — 1,470 Share-based compensation expense— — — 1,338 — — — 1,338 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability— — — (476)— — — (476)Restricted stock surrendered due to employee tax liability— — — (527)— — — (527)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan— — — — (28)— — (28)Shares purchased under the Dividend Reinvestment Plan— — — — (30)— — (30)
Stock appreciation right dividend equivalents— — — — (94)— — (94)
Dividends declared ($0.06 per common share)Dividends declared ($0.06 per common share)— — — — (3,006)— — (3,006)Dividends declared ($0.06 per common share)— — — — (2,990)— — (2,990)
Preferred stock dividendsPreferred stock dividends— — — — (3,442)— — (3,442)Preferred stock dividends— — — — (1,727)— — (1,727)
Balance at June 30, 2020$185,037 $522 $5 $632,117 $85,670 $(40,827)$(15,565)$846,959 
Balance at June 30, 2021Balance at June 30, 2021$94,956 $527 $5 $630,654 $129,307 $(40,827)$14,740 $829,362 

See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY, continued
(Amounts in thousands)
(Unaudited)
Preferred StockCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' EquityPreferred StockCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
VotingClass B
Non-Voting
VotingClass B
Non-Voting
Six Months Ended June 30, 2021
Balance at December 31, 2020$184,878 $522 $5 $634,704 $110,179 $(40,827)$7,746 $897,207 
Six Months Ended June 30, 2022Six Months Ended June 30, 2022
Balance at December 31, 2021Balance at December 31, 2021$94,956 $646 $5 $854,873 $147,894 $(40,827)$7,743 $1,065,290 
Comprehensive income:Comprehensive income:Comprehensive income:
Net incomeNet income— — — — 33,425 — — 33,425 Net income— — — — 75,224 — — 75,224 
Other comprehensive income, net— — — — — — 6,994 6,994 
Other comprehensive loss, netOther comprehensive loss, net— — — — — — (41,802)(41,802)
Issuance of common stockIssuance of common stock— — (2)— — — Issuance of common stock— — (1)— — — — 
Redemption of preferred stockRedemption of preferred stock(89,922)— — — (3,347)— — (93,269)Redemption of preferred stock(94,956)— — — (3,747)— — (98,703)
Purchase of 2,328,726 shares of treasury stockPurchase of 2,328,726 shares of treasury stock— — — — — (43,186)— (43,186)
Exercise of stock options— — — 300 — — — 300 
Exercise of SSARs— — (5,375)— — — (5,372)
Share-based compensation expenseShare-based compensation expense— — — 2,882 — — — 2,882 Share-based compensation expense— — — 2,767 — — — 2,767 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability— — — (1,855)— — — (1,855)Restricted stock surrendered due to employee tax liability— — — (1,560)— — — (1,560)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan— — — — (59)— — (59)Shares purchased under the Dividend Reinvestment Plan— — — — (60)— — (60)
Dividends declared ($0.12 per common share)Dividends declared ($0.12 per common share)— — — — (6,023)— — (6,023)Dividends declared ($0.12 per common share)— — — — (7,420)— — (7,420)
Preferred stock dividendsPreferred stock dividends— — — — (4,868)— — (4,868)Preferred stock dividends— — — — (1,420)— — (1,420)
Balance at June 30, 2021$94,956 $527 $5 $630,654 $129,307 $(40,827)$14,740 $829,362 
Balance at June 30, 2022Balance at June 30, 2022$ $647 $5 $856,079 $210,471 $(84,013)$(34,059)$949,130 
Six Months Ended June 30, 2020
Balance at December 31, 2019$189,825 $520 $5 $629,848 $127,733 $(28,786)$(11,900)$907,245 
Impact of adoption of ASU No. 2016-13— — — — (4,503)— — (4,503)
Six Months Ended June 30, 2021Six Months Ended June 30, 2021
Balance at December 31, 2020Balance at December 31, 2020$184,878 $522 $5 $634,704 $110,179 $(40,827)$7,746 $897,207 
Comprehensive loss:Comprehensive loss:Comprehensive loss:
Net lossNet loss— — — — (25,042)— — (25,042)Net loss— — — — 33,425 — — 33,425 
Other comprehensive loss, net— — — — — — (3,665)(3,665)
Other comprehensive income, netOther comprehensive income, net— — — — — — 6,994 6,994 
Issuance of common stockIssuance of common stock— — (2)— — — Issuance of common stock— — (2)— — — — 
Redemption of preferred stockRedemption of preferred stock(4,788)— — — 575 — — (4,213)Redemption of preferred stock(89,922)— — — (3,347)— — (93,269)
Repurchase of 827,584 shares of common stock— — — — — (12,041)— (12,041)
Exercise of stock optionsExercise of stock options— — — 300 — — — 300 
Exercise of stock appreciation rightsExercise of stock appreciation rights— — (5,375)— — — (5,372)
Share-based compensation expenseShare-based compensation expense— — — 3,046 — — — 3,046 Share-based compensation expense— — — 2,882 — — — 2,882 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability— — — (775)— — — (775)Restricted stock surrendered due to employee tax liability— — — (1,855)— — — (1,855)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan— — — — (47)— — (47)Shares purchased under the Dividend Reinvestment Plan— — — — (59)— — (59)
Stock appreciation right dividend equivalents— — — — (188)— — (188)
Dividends declared ($0.12 per common share)Dividends declared ($0.12 per common share)— — — — (5,883)— — (5,883)Dividends declared ($0.12 per common share)— — — — (6,023)— — (6,023)
Preferred stock dividendsPreferred stock dividends— — — — (6,975)— — (6,975)Preferred stock dividends— — — — (4,868)— — (4,868)
Balance at June 30, 2020$185,037 $522 $5 $632,117 $85,670 $(40,827)$(15,565)$846,959 
Balance at June 30, 2021Balance at June 30, 2021$94,956 $527 $5 $630,654 $129,307 $(40,827)$14,740 $829,362 

See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
June 30,
Six Months Ended
June 30,
2021202020222021
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net income (loss)$33,425 $(25,042)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
(Reversal of) provision for credit losses(3,261)27,587 
Net incomeNet income$75,224 $33,425 
Adjustments to reconcile net income to net cash provided by operating activitiesAdjustments to reconcile net income to net cash provided by operating activities
Reversal of provision for credit lossesReversal of provision for credit losses(31,542)(3,261)
Reversal of provision for loan repurchasesReversal of provision for loan repurchases(231)(634)Reversal of provision for loan repurchases(961)(231)
Depreciation on premises and equipmentDepreciation on premises and equipment7,741 8,404 Depreciation on premises and equipment7,920 7,741 
Amortization of intangible assetsAmortization of intangible assets564 859 Amortization of intangible assets754 564 
Amortization of debt issuance costsAmortization of debt issuance costs812 139 Amortization of debt issuance costs837 812 
Net amortization of premium on securitiesNet amortization of premium on securities774 258 Net amortization of premium on securities587 774 
Net accretion of deferred loan costs and feesNet accretion of deferred loan costs and fees(1,983)(553)Net accretion of deferred loan costs and fees(81)(1,983)
Net amortization (accretion) of premiums (discounts) on purchased loans1,434 (355)
Write-off of other assets related to naming rights termination, net6,669 
Debt extinguishment fee2,515 
Deferred income tax benefit(1,963)(71)
Net amortization of premiums on purchased loansNet amortization of premiums on purchased loans652 1,434 
Deferred income tax expense (benefit)Deferred income tax expense (benefit)975 (1,963)
Bank owned life insurance incomeBank owned life insurance income(1,362)(1,169)Bank owned life insurance income(1,606)(1,362)
Share-based compensation expenseShare-based compensation expense2,882 3,046 Share-based compensation expense2,767 2,882 
(Income) loss on interest rate swaps(200)288 
Income from interest rate swapsIncome from interest rate swaps(185)(200)
Loss on investments in alternative energy partnerships and affordable housing investmentsLoss on investments in alternative energy partnerships and affordable housing investments4,864 4,033 Loss on investments in alternative energy partnerships and affordable housing investments3,456 4,864 
Impairment on capitalized software projects157 
Fair value adjustment for loans held-for-saleFair value adjustment for loans held-for-sale(20)1,561 Fair value adjustment for loans held-for-sale— (20)
Net loss on sale of loans27 
Net gain on sale of securities available-for-saleNet gain on sale of securities available-for-sale(2,011)Net gain on sale of securities available-for-sale(16)— 
Gain on sale-leaseback of branchGain on sale-leaseback of branch(771)— 
Loss on disposal of property and equipmentLoss on disposal of property and equipment106 Loss on disposal of property and equipment— 
Repurchase of mortgage loansRepurchase of mortgage loans(1,433)Repurchase of mortgage loans(1,262)(1,433)
Proceeds from sales of and principal collected on loans held-for-sale13 613 
Proceeds from sales of and principal collected on other loans held-for-saleProceeds from sales of and principal collected on other loans held-for-sale— 13 
Change in accrued interest receivable and other assetsChange in accrued interest receivable and other assets(3,246)1,620 Change in accrued interest receivable and other assets26,514 (3,246)
Change in accrued interest payable and other liabilitiesChange in accrued interest payable and other liabilities25,279 (30,093)Change in accrued interest payable and other liabilities(8,122)25,279 
Net cash provided by (used in) operating activities64,089 (2,046)
Net cash provided by operating activitiesNet cash provided by operating activities75,148 64,089 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Proceeds from sales of securities available-for-saleProceeds from sales of securities available-for-sale22,728 Proceeds from sales of securities available-for-sale17,645 — 
Proceeds from maturities and calls of securities available-for-saleProceeds from maturities and calls of securities available-for-sale100,230 30,000 Proceeds from maturities and calls of securities available-for-sale38,500 100,230 
Proceeds from principal repayments of securities available-for-sale14,000 2,971 
Purchases of securities available-for-salePurchases of securities available-for-sale(15,000)(226,813)
Proceeds from principal repayments of securities held-to-maturity and available-for-saleProceeds from principal repayments of securities held-to-maturity and available-for-sale20,495 14,000 
Purchases of securities available-for-sale(226,813)(322,590)
Loan originations and principal collections, netLoan originations and principal collections, net274,971 349,818 Loan originations and principal collections, net474,252 274,971 
Purchase of loans(366,000)(25,839)
Purchases of loansPurchases of loans(641,556)(366,000)
Redemption of Federal Home Loan Bank stockRedemption of Federal Home Loan Bank stock436 22,171 Redemption of Federal Home Loan Bank stock— 436 
Purchase of Federal Home Loan Bank and other bank stock(499)(9,336)
Purchases of Federal Home Loan Bank and other bank stockPurchases of Federal Home Loan Bank and other bank stock(6,857)(499)
Purchase of mortgage servicing rightsPurchase of mortgage servicing rights(20,563)— 
Purchases of premises and equipmentPurchases of premises and equipment(1,718)(3,467)Purchases of premises and equipment(1,381)(1,718)
Proceeds from sale-leaseback of branchProceeds from sale-leaseback of branch2,400 — 
Payments of capital lease obligationsPayments of capital lease obligations(69)(266)Payments of capital lease obligations— (69)
Funding of equity investment(1,879)(14,201)
Decrease (increase) in investments in alternative energy partnerships1,108 (2,630)
Net cash provided by investing activities(206,233)49,359 
Funding of equity investmentsFunding of equity investments(3,950)(1,879)
Decrease in investments in alternative energy partnershipsDecrease in investments in alternative energy partnerships1,156 1,108 
Net cash (used in) provided by investing activitiesNet cash (used in) provided by investing activities(134,859)(206,233)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Net increase in depositsNet increase in deposits120,744 610,298 Net increase in deposits119,248 120,744 
Net increase (decrease) in short-term Federal Home Loan Bank advancesNet increase (decrease) in short-term Federal Home Loan Bank advances(50,000)(447,000)Net increase (decrease) in short-term Federal Home Loan Bank advances35,000 (50,000)
Repayment of long-term Federal Home Loan Bank advances(235,000)
Proceeds from long-term Federal Home Loan Bank advances111,000 
Debt extinguishment and financing fees paid(9,368)
Net increase in other borrowingsNet increase in other borrowings125,000 Net increase in other borrowings73,000 125,000 
Redemption of preferred stockRedemption of preferred stock(93,269)(4,213)Redemption of preferred stock(98,703)(93,269)
Purchase of treasury stockPurchase of treasury stock(12,041)Purchase of treasury stock(43,186)— 
Proceeds from exercise of stock optionsProceeds from exercise of stock options300 Proceeds from exercise of stock options— 300 
Purchase of stock surrendered to pay tax liabilityPurchase of stock surrendered to pay tax liability(7,227)(775)Purchase of stock surrendered to pay tax liability(1,560)(7,227)
Dividend equivalents paid on participating securities(188)
Dividends paid on preferred stockDividends paid on preferred stock(4,868)(6,975)Dividends paid on preferred stock(1,727)(4,868)
Dividends paid on common stockDividends paid on common stock(6,023)(5,883)Dividends paid on common stock(7,420)(6,023)
Net cash provided by (used in) financing activities84,657 (145)
Net cash provided by financing activitiesNet cash provided by financing activities74,652 84,657 
Net change in cash and cash equivalentsNet change in cash and cash equivalents(57,487)47,168 Net change in cash and cash equivalents14,941 (57,487)
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period220,819 373,472 Cash and cash equivalents at beginning of period228,123 220,819 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$163,332 $420,640 Cash and cash equivalents at end of period$243,064 $163,332 
Supplemental cash flow informationSupplemental cash flow informationSupplemental cash flow information
Interest paid on deposits and borrowed fundsInterest paid on deposits and borrowed funds19,996 40,626 Interest paid on deposits and borrowed funds16,574 19,996 
Income taxes paidIncome taxes paid8,932 62 Income taxes paid9,692 8,932 
Supplemental disclosure of non-cash activitiesSupplemental disclosure of non-cash activitiesSupplemental disclosure of non-cash activities
Transfer from loans to other real estate owned, netTransfer from loans to other real estate owned, net3,253 Transfer from loans to other real estate owned, net— 3,253 
Reclassification of securities available-for-sale to held-to-maturityReclassification of securities available-for-sale to held-to-maturity329,416 — 
Equipment acquired under capital leasesEquipment acquired under capital leases256 30 Equipment acquired under capital leases— 256 
Operating lease right-of-use assets recognizedOperating lease right-of-use assets recognized3,883 Operating lease right-of-use assets recognized1,253 3,883 
Operating lease liabilities recognizedOperating lease liabilities recognized3,883 Operating lease liabilities recognized1,253 3,883 
Impact of adoption of ASU 2016-13 on retained earnings— (4,503)
Commitments to fund low income housing tax credit investmentsCommitments to fund low income housing tax credit investments7,000 — 
Goodwill adjustments for purchase accountingGoodwill adjustments for purchase accounting826 — 

See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 20212022

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Banc of California, Inc. (collectively, with its consolidated subsidiaries, the Company, we, us, and our) is a financial holding company under the Bank Holding Company Act of 1956, as amended, headquartered in Santa Ana, California and incorporated under the laws of Maryland. Banc of California, Inc. is subject to regulation by the Board of Governors of the Federal Reserve System (“FRB”) and its wholly-owned subsidiary, Banc of California, National Association (the “Bank”), operates under a national bank charter issued by the Office of the Comptroller of the Currency (“OCC”), the Bank's primary regulator. The Bank is a member of the Federal Home Loan Bank (“FHLB”) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation (“FDIC”).
The Bank offers a variety of financial services to meet the banking and financial needs of the communities it serves, with operations conducted through 3031 full-service branches located throughout Southern California as of June 30, 2021.
Proposed Merger with Pacific Mercantile Bancorp:In March 2021, we entered into an agreement to merge (the “Merger Agreement”) with Pacific Mercantile Bancorp (“PMBC”), pursuant to which PMBC will merge (the “Merger”) with and into the Company, with the Company as the surviving corporation. Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of PMBC common stock, excluding certain specified shares, will be converted into the right to receive 0.50 (the “Exchange Ratio”) of a share of the Company's common stock. In addition, at the effective time of the Merger, the Company will cash out all outstanding share-based awards based on formulas using the average price of the Company's common stock for a 20-day trading period prior to the closing of the Merger. Subject to regulatory approval, the transaction is expected to close during the third quarter of 2021.2022.
Basis of Presentation: The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These interim statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 20202021 filed by us with the SEC. The December 31, 20202021 consolidated statements of financial condition presented herein hashave been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC. Certain prior period amounts have been reclassified to conform to current period presentation, including i) reclassification of income taxes receivable(i) loans held for sale to other assets in the consolidated statement of financial condition, (ii) fair value adjustment for loans held-for-sale to other income, (iii) income or loss from equity investments to other income, and ii) reclassification of outside services(iv) advertising and promotion to all other expense from "outside services fees" to "all other expense" in the accompanying consolidated statements of operations.
In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. The results of operations for the three and six months ended June 30, 20212022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.2022.
Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of June 30, 20212022 and December 31, 20202021 and for the three and six months ended June 30, 20212022 and 2020.2021. Significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its then wholly-owned subsidiaries.
Adopted Accounting Pronouncements: On January 1, 2021, we adopted Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) which simplifies the accounting for income taxes by removing certain exceptions for investments, intra-period allocations, and interim calculations, and adding guidance to reduce the complexity of applying Topic 740. The adoption of these amendments did not have a material effect on our consolidated financial statements.
Significant Accounting Policies: The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. We have not made any significant changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC.SEC, except for the accounting for securities held-to-maturity, as described below.
Securities Held-to-Maturity. Securities held-to-maturity consist of debt securities that the Company has the positive intent and ability to hold to maturity. These securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Premiums and discounts are amortized or accreted over the life of the security as an adjustment to its yield using the interest method. Transfers of debt securities into the held-to-maturity portfolio are accounted for at fair value. The unrealized gain or loss at the date of transfer is recognized as part of the amortized cost of the transferred security. This amount, along with the unrealized gain or loss included in accumulated other comprehensive income, is amortized or accreted over the life of the security as an adjustment to its yield using the interest method.
Securities held-to-maturity are analyzed for credit losses under ASC 326, which requires the Company to determine whether any impairment exists as of the reporting date and, as applicable, whether that impairment is due to credit deterioration. An allowance for credit losses would be established for losses on held-to-maturity debt securities due to credit deterioration and would be recorded as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. Held-to-maturity debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity debt securities are placed on nonaccrual status, unpaid interest recognized as interest income is reversed.
10

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Mortgage Servicing Rights: Mortgage servicing rights ("MSRs") give the Company the contractual rights to receive service fees in exchange for performing loan servicing functions on behalf of investors who have an ownership interest in the mortgage loan balances. Purchased mortgage servicing rights are recorded at the purchase price at the time of acquisition, which approximates the fair value of such assets. Subsequent to acquisition, MSRs are accounted for under the amortization method and are then amortized over the period of estimated net servicing income (level yield method) generated from servicing the loans. MSRs are evaluated quarterly for impairment by estimating the fair value of the MSRs and comparing that value to their amortized cost. Impairment, if any, is recognized in a valuation allowance to the extent the fair value is less than the carrying amount of the MSRs. Subsequent increases in the fair value of impaired MSRs are recognized only up to the amount of the previously recognized valuation allowance. The estimated fair value of the MSRs is obtained through independent third party valuations based on an analysis of future cash flows, incorporating key assumptions including discount rates, prepayment speeds and interest rates that we believe are consistent with the assumptions used by other similar market participants in valuing MSRs.
We purchased $22.8 million of SFR mortgage servicing rights during the second quarter of 2022. The unpaid principal balance of the loans underlying these purchased servicing rights is approximately $1.73 billion at June 30, 2022. We do not have an ownership interest in the mortgage loan balances therefore those loans are not included in our consolidated statements of financial condition.
Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and disclosures provided, and actual results could differ. The allowance for credit losses (“ACL”) (which includes the allowance for loan losses (“ALL”) and the reserve for
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unfunded loan commitments), provision for credit losses, loan repurchase reserve, realization of deferred tax assets, valuation of goodwill and other intangible assets, valuation of investments in alternative energy partnerships, and the fair value measurement of financial instruments are particularly subject to changecomplex and such change couldrequire judgment which may have a material effect on the consolidated financial statements.
Recent Accounting Guidance: Beginning in June 2023, the London Interbank Offered Rate (“LIBOR”) will be discontinued. To assist entities with the transition away from LIBOR,In March 2022, the Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to clarify GAAPdisclose current-period gross write-offs for financing receivables and provide practical expedients for entities to utilize during the timenet investment in leases by year of transition. We areorigination in the process of evaluating the potential impact the discontinuation of LIBOR will have on our consolidated financial statements. The optional expedients and exceptions provided through this relief are set forth below and were effective immediately; however, certain provisions from this relief are not yet determined due to the fact that LIBOR has not yet been discontinued.
In March 2020, the FASB issuedvintage disclosures. ASU 2020-04, Reference Rate Reform (Topic 848), ("ASU 2020-04") which provided optional guidance, for a limited period of time, to ease the potential burden in accounting for (or recognizing the benefits of) reference rate reform on financial reporting. The amendments in ASU 2020-04 were elective and applied to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provided optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria. When elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant topic or industry subtopic within the codification that contains the guidance that otherwise would be required to be applied. The amendments in ASU 2020-04 were2022-02 is effective for all entities as of March 12, 2020 throughfiscal years beginning after December 31, 2022.
In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848)("ASU 2021-01"). The amendments in ASU 2021-01 clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848,15, 2022, including interim periods within those fiscal years. Early adoption is permitted if elected by an entity apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments inhas adopted ASU 2021-01 are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also optionally apply to all entities that designate receive-variable-rate, pay-variable-rate cross-currency interest rate swaps as hedging instruments in net investment hedges that are modified as a result of reference rate reform. The amendments in2016-13. ASU 2021-01 were effective immediately for all entities. ASU 2021-012022-02 is not expected to have a material effect on our consolidated financial statements.
Business Combination:On October 18, 2021, we completed our merger with Pacific Mercantile Bancorp (“PMB”), pursuant to which PMB merged with and into the Company, with the Company as the surviving corporation. PMB was the bank holding company of the wholly-owned Pacific Mercantile Bank, a California state chartered commercial bank headquartered in Costa Mesa, California and operated 7 banking offices, including 3 full service branches, located throughout Southern California.
Under the terms and conditions of the merger, each outstanding share of PMB common stock, aggregating 23,713,417 shares, was converted into the right to receive 0.5 (the "Exchange Ratio") of a share of the Company's common stock. In addition, at the effective time of the merger, the Company paid $3.2 million in cash for all outstanding PMB share-based awards, including outstanding shares subject to unvested restricted stock awards. In the merger, the Company issued 11,856,713 shares of common stock with an estimated fair value of $222.2 million based upon the $18.74 closing price of the Company's common stock on October 18, 2021. Together with the cash consideration, this resulted in an aggregate purchase price of $225.4 million. The operating results of PMB have been included since the date of acquisition and consequently, may impact the comparison of the financial results for the periods presented.
Goodwill in the amount of $58.0 million was recognized and represents the synergies and economies of scale expected
from combining the operations of PMB with ours. Refer to Note 2 - Business Combinations in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC for further information.

NOTE 2 – FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy
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ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The topic describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured on a Recurring Basis
Securities Available-for-Sale: The fair values of securities available-for-sale are generally determined by quoted market prices in active markets, if available (Level 1). If quoted market prices are not available, we primarily employ independent pricing services that utilize pricing models to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds,
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credit information, and respective terms and conditions for debt instruments (Level 2). We employ proceduresadhere to established processes to monitor the pricing service'sservices' assumptions and establish processes to challenge the pricing service's valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. Level 2 securities include SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities, non-agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management's judgment and evaluation for valuation. We had 0 securities available-for-sale classified as Level 3 at June 30, 2021 or December 31, 2020.
Loans Held-for-Sale, Carried at Fair Value: The fair value of loans held-for-sale is based on commitments outstanding from investors and current offerings in the secondary market for portfolios with similar characteristics, except for loans that are repurchased out of GNMA loan pools that become severely delinquent which are valued based on an internal model. Loans held-for-sale subject to recurring fair value adjustments are classified as Level 2, or in the case of loans repurchased, Level 3. The fair value includes the servicing value of the loans and any accrued interest.
Derivative Assets and Liabilities:
Interest Rate Swaps and Caps.Swaps. We offer interest rate swap and cap products to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans. We originate a variable rate loan and enter into a variable-to-fixed interest rate swap with the client. We also enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow us to originate a variable rate loan while providing a contract for fixed interest payments for the client. The net cash flow for us is equal to the interest income received from a variable rate loan originated with the client plus a fee. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.
Foreign Exchange Contracts. 
We offer short-term foreign exchange contracts to customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with these products, we also enter into offsetting back-to-back contracts with institutional counterparties to hedge the Company’sour foreign exchange rate risk. These back-to-back contracts are intended to offset each other and allow us to offer our customers foreign exchange products. The fair value of both of these offsetting asset and liability instruments is based on the change in the underlying foreign exchange rate. We are subject to counterparty risk in the event our customers or institutional counterparties default under these contracts. Given the short-term nature of the contracts, the counterparties’ credit risks are considered nominal and typically result in no adjustments to the valuation of the short-term foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of these contracts is classified as Level 2.

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The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
Fair Value Measurement LevelFair Value Measurement Level
($ in thousands)($ in thousands)Carrying ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
($ in thousands)Carrying ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
June 30, 2021
June 30, 2022June 30, 2022
AssetsAssets
Securities available-for-sale:Securities available-for-sale:
SBA loan pools securitiesSBA loan pools securities$13,062 $— $13,062 $— 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities11,365 — 11,365 — 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations154,053 — 154,053 — 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities45,481 — 45,481 — 
Collateralized loan obligationsCollateralized loan obligations478,203 — 478,203 — 
Corporate debt securitiesCorporate debt securities163,271 — 163,271 — 
Derivative assets:Derivative assets:
Interest rate swaps (1)
Interest rate swaps (1)
1,074 — 1,074 — 
Foreign exchange contracts (1)
Foreign exchange contracts (1)
186 — 186 — 
LiabilitiesLiabilities
Derivative liabilities:Derivative liabilities:
Interest rate swaps (2)
Interest rate swaps (2)
1,082 — 1,082 — 
Foreign exchange contracts (2)
Foreign exchange contracts (2)
168 — 168 — 
December 31, 2021December 31, 2021
AssetsAssetsAssets
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pools securitiesSBA loan pools securities$16,223 $$16,223 $SBA loan pools securities$14,591 $— $14,591 $— 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities197,685 197,685 U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities191,969 — 191,969 — 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations265,184 265,184 U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations241,541 — 241,541 — 
Municipal securitiesMunicipal securities120,980 120,980 Municipal securities119,015 — 119,015 — 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities155 155 Non-agency residential mortgage-backed securities56,025 — 56,025 — 
Collateralized loan obligationsCollateralized loan obligations584,307 584,307 Collateralized loan obligations518,964 — 518,964 — 
Corporate debt securitiesCorporate debt securities168,620 168,620 Corporate debt securities173,598 — 173,598 — 
Loans held-for-sale, carried at fair value2,853 1,912 941 
Derivative assets:Derivative assets:Derivative assets:
Interest rate swaps and caps (1)
4,960 4,960 
Interest rate swaps (1)
Interest rate swaps (1)
3,390 — 3,390 — 
Foreign exchange contracts (1)
Foreign exchange contracts (1)
224 224 
Foreign exchange contracts (1)
175 — 175 — 
LiabilitiesLiabilitiesLiabilities
Derivative liabilities:Derivative liabilities:Derivative liabilities:
Interest rate swaps and caps (2)
5,242 5,242 
Interest rate swaps (2)
Interest rate swaps (2)
3,594 — 3,594 — 
Foreign exchange contracts (2)
Foreign exchange contracts (2)
212 212 
Foreign exchange contracts (2)
146 — 146 — 
December 31, 2020
Assets
Securities available-for-sale:
SBA loan pools securities$17,354 $$17,354 $
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities106,384 106,384 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations211,831 211,831 
Municipal securities68,623 68,623 
Non-agency residential mortgage-backed securities160 160 
Collateralized loan obligations677,785 677,785 
Corporate debt securities149,294 149,294 
Loans held-for-sale, carried at fair value1,413 468 945 
Derivative assets:
Interest rate swaps and caps (1)
7,304 7,304 
Foreign exchange contracts (1)
328 328 
Liabilities
Derivative liabilities:
Interest rate swaps and caps (2)
7,789 7,789 
Foreign exchange contracts (2)
313 313 

(1)Included in other assets in the Consolidated Statements of Financial Condition.
(2)Included in accrued expenses and other liabilities in the Consolidated Statements of Financial Condition.
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The following table presents a reconciliation ofThere were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)2021202020212020
Loans repurchased from GNMA Loan Pools
Balance at beginning of period$943 $17,127 $945 $19,233 
Total gains (losses) (realized/unrealized):
Included in earnings—fair value adjustment22 (1,369)
Sales, settlements, and other(2)(464)(4)(1,179)
Balance at end of period$941 $16,685 $941 $16,685 

Loans repurchased from GNMA loan pools had aggregate unpaid principal balances of $1.1 million as ofthree and six months ended June 30, 20212022 and December 31, 2020. The significant unobservable inputs used in the fair value measurement of our loans repurchased from GNMA loan pools at June 30, 2021 and December 31, 2020 included an expected loss rate of 1.55% for insured loans and 20.00% for uninsured loans. There may be inherent weaknesses in any valuation technique and/or changes in the underlying assumptions used such as discount rates and estimates of future cash flows could significantly affect the results.
Fair Value Option
Loans Held-for-Sale, Carried at Fair Value: We elected the fair value option for certain SFR mortgage loans held-for-sale. Electing to measure SFR mortgage loans held-for-sale at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. We also elected to record loans repurchased from GNMA at fair value, as we intend to sell them after curing any defects and, accordingly, they are classified as held-for-sale.
The following table presents the fair value and aggregate principal balance of certain assets under the fair value option:
June 30, 2021December 31, 2020
($ in thousands)Fair ValueUnpaid Principal BalanceDifferenceFair ValueUnpaid Principal BalanceDifference
Loans held-for-sale, carried at fair value:
Total loans$2,853 $3,267 $(414)$1,413 $1,680 $(267)
Nonaccrual loans (1)
1,008 1,126 (118)654 750 (96)
(1)Includes loans guaranteed by the U.S. government of $189 thousand and $190 thousand at June 30, 2021 and December 31, 2020.

There were 0 loans held-for-sale that were 90 days or more past due and still accruing interest as of June 30, 2021 and December 31, 2020.
The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The following table presents changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)2021202020212020
Net gains (losses) from fair value changes:
Fair value adjustment for loans held-for-sale$20 $25 $20 $(1,561)

Interest income on loans held-for-sale under the fair value option is measured based on the contractual interest rate and reported in interest income on loans, including fees in the consolidated statements of operations.2021.
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Assets and Liabilities Measured on a Non-Recurring Basis
ImpairedIndividually Evaluated Loans: The fair value of impairedindividually evaluated loans with specific allocations of the ACL based on collateral values is generally based on recent real estate appraisals and automated valuation models (“AVMs”). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers for differences between the comparable sales and income data available. Such adjustments are typically deemed significant unobservable inputs used for determining fair value and result in a Level 3 classification.
The following table presents our financial assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:
Fair Value Measurement LevelFair Value Measurement Level
($ in thousands)($ in thousands)Carrying ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
($ in thousands)Fair
Value
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
June 30, 2021
June 30, 2022June 30, 2022
AssetsAssetsAssets
Collateral dependent loans:Collateral dependent loans:Collateral dependent loans:
Single family residential mortgageSingle family residential mortgage$2,319 $$$2,319 Single family residential mortgage$3,600 $— $— $3,600 
Commercial and industrialCommercial and industrial130 130 Commercial and industrial10,903 — — 10,903 
SBASBA5,402 5,402 SBA4,029 — — 4,029 
December 31, 2020
December 31, 2021December 31, 2021
AssetsAssetsAssets
Collateral dependent loans:Collateral dependent loans:Collateral dependent loans:
Commercial and industrialCommercial and industrial$12,272 $— $— $12,272 
SBASBA$629 $$$629 SBA3,886 — — 3,886 

The following table presents the gains (losses) recognized on assets measured at fair value on a non-recurring basis for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
Collateral dependent loans:Collateral dependent loans:Collateral dependent loans:
Single family residential mortgageSingle family residential mortgage$(211)$$(211)$22 Single family residential mortgage$(1)$(211)$(340)$(211)
Commercial and industrialCommercial and industrial20 (6,091)38 (7,422)Commercial and industrial(564)20 (1,198)38 
SBASBA(376)(670)(509)(1,189)SBA(198)(376)(172)(509)
Other consumerOther consumer(216)— (243)— 
Commercial real estateCommercial real estate(140)(140)Commercial real estate— (140)— (140)
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Estimated Fair Values of Financial Instruments
The following table presents the carrying amounts and estimated fair values of financial assets and liabilities as of the dates indicated:
Carrying AmountFair Value Measurement LevelCarrying AmountFair Value Measurement Level
($ in thousands)($ in thousands)Level 1Level 2Level 3Total($ in thousands)Level 1Level 2Level 3Total
June 30, 2021
June 30, 2022June 30, 2022
Financial assetsFinancial assetsFinancial assets
Cash and cash equivalentsCash and cash equivalents$163,332 $163,332 $$$163,332 Cash and cash equivalents$243,064 $243,064 $— $— $243,064 
Securities held-to-maturitySecurities held-to-maturity329,272 — 285,672 — 285,672 
Securities available-for-saleSecurities available-for-sale1,353,154 1,353,154 1,353,154 Securities available-for-sale865,435 — 865,435 — 865,435 
Federal Home Loan Bank and other bank stockFederal Home Loan Bank and other bank stock51,489 — 51,489 — 51,489 
Federal Home Loan Bank and other bank stock44,569 44,569 44,569 
Loans held-for-sale, carried at fair value2,853 1,912 941 2,853 
Loans receivable, net of allowance for credit lossesLoans receivable, net of allowance for credit losses5,909,592 6,002,472 6,002,472 Loans receivable, net of allowance for credit losses7,357,471 — — 6,980,780 6,980,780 
Accrued interest receivableAccrued interest receivable28,312 28,312 28,312 Accrued interest receivable32,750 32,750 — — 32,750 
Derivative assetsDerivative assets5,184 5,184 5,184 Derivative assets1,260 — 1,260 — 1,260 
Financial liabilitiesFinancial liabilitiesFinancial liabilities
DepositsDeposits6,206,544 6,207,271 6,207,271 Deposits7,558,683 6,809,378 743,027 — 7,552,405 
Advances from Federal Home Loan BankAdvances from Federal Home Loan Bank490,419 524,874 524,874 Advances from Federal Home Loan Bank511,695 — 506,061 — 506,061 
Other borrowingsOther borrowings125,000 125,000 125,000 Other borrowings98,000 — 98,017 — 98,017 
Long-term debtLong-term debt256,554 274,219 274,219 Long-term debt274,587 — 269,763 — 269,763 
Derivative liabilitiesDerivative liabilities5,454 5,454 5,454 Derivative liabilities1,250 — 1,250 — 1,250 
Accrued interest payableAccrued interest payable3,348 3,348 3,348 Accrued interest payable4,082 4,082 — — 4,082 
December 31, 2020
December 31, 2021December 31, 2021
Financial assetsFinancial assetsFinancial assets
Cash and cash equivalentsCash and cash equivalents$220,819 $220,819 $$$220,819 Cash and cash equivalents$228,123 $228,123 $— $— $228,123 
Securities available-for-saleSecurities available-for-sale1,231,431 1,231,431 1,231,431 Securities available-for-sale1,315,703 — 1,315,703 — 1,315,703 
Federal Home Loan Bank and other bank stockFederal Home Loan Bank and other bank stock44,506 44,506 44,506 Federal Home Loan Bank and other bank stock44,632 — 44,632 — 44,632 
Loans held-for-sale1,413 468 945 1,413 
Loans receivable, net of allowance for credit lossesLoans receivable, net of allowance for credit losses5,817,375 5,936,708 5,936,708 Loans receivable, net of allowance for credit losses7,158,896 — — 7,150,703 7,150,703 
Accrued interest receivableAccrued interest receivable29,445 29,445 29,445 Accrued interest receivable30,991 30,991 — — 30,991 
Derivative assetsDerivative assets7,632 7,632 7,632 Derivative assets3,565 — 3,565 — 3,565 
Financial liabilitiesFinancial liabilitiesFinancial liabilities
DepositsDeposits6,085,800 6,087,714 6,087,714 Deposits7,439,435 6,932,717 506,711 — 7,439,428 
Advances from Federal Home Loan BankAdvances from Federal Home Loan Bank539,795 585,416 585,416 Advances from Federal Home Loan Bank476,059 — 500,323 — 500,323 
Other borrowingsOther borrowings25,000 — 25,000 — 25,000 
Long-term debtLong-term debt256,315 273,230 273,230 Long-term debt274,386 — 294,404 — 294,404 
Derivative liabilitiesDerivative liabilities8,102 8,102 8,102 Derivative liabilities3,740 — 3,740 — 3,740 
Accrued interest payableAccrued interest payable3,714 3,714 3,714 Accrued interest payable3,546 3,546 — — 3,546 

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NOTE 3 – INVESTMENT SECURITIES
The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated:
($ in thousands)($ in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value($ in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
June 30, 2021
June 30, 2022June 30, 2022
Securities held-to-maturity:Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$153,621 $— $(18,334)$135,287 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations61,447 — (8,051)53,396 
Municipal securitiesMunicipal securities114,204 — (17,215)96,989 
Total securities held-to-maturityTotal securities held-to-maturity$329,272 $ $(43,600)$285,672 
Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$13,085 $— $(23)$13,062 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities12,051 — (686)11,365 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations160,657 258 (6,862)154,053 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities53,122 — (7,641)45,481 
Collateralized loan obligationsCollateralized loan obligations492,775 — (14,572)478,203 
Corporate debt securitiesCorporate debt securities165,266 973 (2,968)163,271 
Total securities available-for-saleTotal securities available-for-sale$896,956 $1,231 $(32,752)$865,435 
December 31, 2021December 31, 2021
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$16,301 $$(78)$16,223 SBA loan pool securities$14,679 $— $(88)$14,591 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities191,029 6,656 197,685 U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities190,382 2,898 (1,311)191,969 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations262,515 3,468 (799)265,184 U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations242,458 1,171 (2,088)241,541 
Municipal securitiesMunicipal securities117,996 3,338 (354)120,980 Municipal securities117,913 2,641 (1,539)119,015 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities151 155 Non-agency residential mortgage-backed securities56,014 11 — 56,025 
Collateralized loan obligationsCollateralized loan obligations587,275 (2,968)584,307 Collateralized loan obligations521,275 — (2,311)518,964 
Corporate debt securitiesCorporate debt securities156,988 11,632 168,620 Corporate debt securities162,002 11,603 (7)173,598 
Total securities available-for-saleTotal securities available-for-sale$1,332,255 $25,098 $(4,199)$1,353,154 Total securities available-for-sale$1,304,723 $18,324 $(7,344)$1,315,703 
December 31, 2020
Securities available-for-sale:
SBA loan pool securities$17,436 $$(82)$17,354 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities99,591 6,793 106,384 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations209,426 2,571 (166)211,831 
Municipal securities64,355 4,272 (4)68,623 
Non-agency residential mortgage-backed securities156 160 
Collateralized loan obligations687,505 (9,720)677,785 
Corporate debt securities141,975 7,319 149,294 
Total securities available-for-sale$1,220,444 $20,959 $(9,972)$1,231,431 

During the first quarter of 2022, certain longer-duration fixed-rate mortgage-backed securities and municipal securities with an amortized cost basis of $346.0 million were transferred from the available-for-sale portfolio to the held-to-maturity portfolio. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which along with the related unrealized loss in accumulated other comprehensive income, is being amortized into interest income as a yield adjustment over the remaining term of the securities.
At June 30, 2021,2022, our investment securities portfolio consisted of agency securities, municipal securities, mortgage-backed securities, collateralized loan obligations (“CLOs”), and corporate debt securities. The expected maturities of these types of securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
There was 0no allowance for credit losses for debt securities held-to-maturity and available-for sale as of June 30, 20212022 and December 31, 2020. 2021. The Company does not consider unrealized losses on these securities to be attributable to credit-related factors, as the unrealized losses have occurred as a result of changes in non-credit related factors such as interest rates, market spreads, and market conditions subsequent to purchase.
Accrued interest receivable on debt securities held-to-maturity and available-for-sale totaled $4.5$5.5 million and $4.7 million at both June 30, 20212022 and December 31, 2020,2021, and is included within other assets in the accompanying consolidated statements of financial condition.
At June 30, 20212022 and December 31, 2020,2021, there were no holdings of any one issuer, other than the U.S. government agency and sponsored enterprises, in an amount greater than 10 percent of our stockholders’ equity.
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The following table presents proceeds from sales and calls of securities available-for-sale and the associated gross gains and losses realized through earnings upon the sales and calls of securities available-for-sale for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
Gross realized gainsGross realized gains$$2,011 $$2,011 Gross realized gains$— $— $209 $— 
Gross realized lossesGross realized lossesGross realized losses— — (193)— 
Net realized gains on sales and callsNet realized gains on sales and calls$0 $2,011 $0 $2,011 Net realized gains on sales and calls$ $ $16 $ 
Proceeds from sales and callsProceeds from sales and calls$100,230 $22,728 $100,230 $52,728 Proceeds from sales and calls$38,500 $100,230 $56,145 $100,230 

Investment securities with carrying values of $28.9 million and $43.7 million as of June 30, 2021 and December 31, 2020, were pledged to secure FHLB advances, public deposits or for other purposes as required or permitted by law.
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The following table summarizes the investment securities available-for-sale with unrealized losses by security type and length of time in a continuous, unrealized loss position as of the dates indicated:
Less Than 12 Months12 Months or LongerTotalLess Than 12 Months12 Months or LongerTotal
($ in thousands)($ in thousands)Fair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized Losses($ in thousands)Fair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized Losses
June 30, 2021
June 30, 2022June 30, 2022
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$16,223 $(78)$$$16,223 $(78)SBA loan pool securities$— $— $13,062 $(23)$13,062 $(23)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities11,365 (686)— — 11,365 (686)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations86,032 (4,126)21,159 (2,736)107,191 (6,862)
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities45,481 (7,641)— — 45,481 (7,641)
Collateralized loan obligationsCollateralized loan obligations218,486 (6,514)240,717 (8,058)459,203 (14,572)
Corporate debt securitiesCorporate debt securities88,532��(2,968)— — 88,532 (2,968)
Total securities available-for-saleTotal securities available-for-sale$449,896 $(21,935)$274,938 $(10,817)$724,834 $(32,752)
December 31, 2021December 31, 2021
Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$— $— $14,591 $(88)$14,591 $(88)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities67,588 (1,311)— — 67,588 (1,311)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations41,799 (799)41,799 (799)U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations85,290 (1,184)17,754 (904)103,044 (2,088)
Municipal securitiesMunicipal securities28,382 (354)28,382 (354)Municipal securities44,748 (919)10,762 (620)55,510 (1,539)
Collateralized loan obligationsCollateralized loan obligations91,888 (112)298,414 (2,856)390,302 (2,968)Collateralized loan obligations81,962 (38)253,002 (2,273)334,964 (2,311)
Corporate debt securitiesCorporate debt securities4,993 (7)— — 4,993 (7)
Total securities available-for-saleTotal securities available-for-sale$178,292 $(1,343)$298,414 $(2,856)$476,706 $(4,199)Total securities available-for-sale$284,581 $(3,459)$296,109 $(3,885)$580,690 $(7,344)
December 31, 2020
SBA loan pool securities$17,354 $(82)$$$17,354 $(82)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations19,033 (166)19,033 (166)
Municipal securities11,401 (4)11,401 (4)
Collateralized loan obligations64,775 (225)613,010 (9,495)677,785 (9,720)
Total securities available-for-sale$112,563 $(477)$613,010 $(9,495)$725,573 $(9,972)

At June 30, 2021,2022, our securities available-for-sale portfolio consisted of 12779 securities, of which 3863 securities were in an unrealized loss position. At December 31, 2020,2021, our securities available-for-sale portfolio consisted of 103119 securities, of which 5046 securities were in an unrealized loss position.
We monitor our securities portfolio to ensure it has adequate credit support. The majority of unrealized losses are related to our collateralized loan obligations. We consider the lowest credit rating for identification of credit impairment for collateralized loan obligations and other securities. As of June 30, 2021, allThe decline in fair value of our collateralized loan obligations investment securities in an unrealized loss position received an investment grade credit rating. The improvement in fair valuesince acquisition was attributable to a combination of changes in interest rates and tighteninggeneral volatility in the credit
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market conditions in response to the economic conditions.uncertainty caused by the global pandemic, rising inflation and conflict between Russia and Ukraine. We do not currently intend to sell any of the securities in an unrealized loss position and further believe, it is more likely than not, that we will not be required to sell these securities before their anticipated recovery. Securities that areAs of June 30, 2022, all of our collateralized loan obligations investment securities in an unrealized gainloss position or are trading at par are evaluated for continued inclusion in our portfolio based on interest rate, liquidity and yield objectives of the Company.received an investment grade credit rating.
During the three and six months ended June 30, 2022 and 2021, and 2020, 0there was no provision for credit losses related to securities available-for-sale was recorded.held-to-maturity or available-for-sale.
The following table presents the amortized cost and fair value of the investment securities portfolio, based on the earlier of contractual maturity dates or next repricing date, as of June 30, 2022:
Held-to-MaturityAvailable-for-Sale
($ in thousands)Amortized CostFair ValueAmortized CostFair Value
Maturity:
Within one year$— $— $592,364 $577,867 
One to five years— — 162,240 159,271 
Five to ten years19,351 17,134 65,645 60,513 
Greater than ten years309,921 268,538 76,707 67,784 
Total$329,272 $285,672 $896,956 $865,435 
Contractual maturities may not reflect the actual maturities of the investments. The average lives for mortgage-backed securities and collateralized mortgage obligations likely will be faster than their contractual maturities due to prepayments and amortization.
Pledged Securities
Investment securities with carrying values of $123.2 million and $8.9 million as of June 30, 2022 and December 31,2021 were pledged to the FRB Discount Window. Investments securities with carrying value of $205.5 million and zero as of June 30, 2022 and December 31, 2021 were pledged to secure FHLB advances.
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The following table presents the fair value and yield informationweighted average yields using amortized cost of the investment securities held-to-maturity portfolio as of June 30, 2022, based on the earlier of contractual maturity dates or next repricing date,dates:
One year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Fair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average Yield
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$— — %$— — %$— — %$135,287 2.69 %$135,287 2.69 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations— — %— — %— — %53,396 2.64 %53,396 2.64 %
Municipal securities— — %— — %17,134 2.19 %79,855 2.71 %96,989 2.62 %
Total securities held-to-maturity$  %$  %$17,134 2.19 %$268,538 2.68 %$285,672 2.66 %

The following table presents the fair value and weighted average yields using amortized cost of the securities available-for-sale portfolio as of June 30, 2021:2022, based on the earlier of contractual maturity dates or next repricing dates:
One year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotalOne year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)($ in thousands)Fair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average Yield($ in thousands)Fair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average Yield
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$16,223 1.53 %$%$%$%$16,223 1.53 %SBA loan pool securities$13,062 1.06 %$— — %$— — %$— — %$13,062 1.06 %
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities%%29,694 2.20 %167,991 2.15 %197,685 2.15 %U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities— — %— — %11,365 2.23 %— — %11,365 2.23 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations109,168 0.64 %11,360 1.98 %43,331 1.34 %101,325 1.80 %265,184 1.25 %U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations86,602 1.73 %9,630 2.24 %35,518 1.55 %22,303 1.81 %154,053 1.73 %
Municipal securities%%15,469 2.62 %105,511 2.38 %120,980 2.41 %
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities%%%155 6.35 %155 6.35 %Non-agency residential mortgage-backed securities— — %— — %— — %45,481 2.51 %45,481 2.51 %
Collateralized loan obligationsCollateralized loan obligations584,307 1.82 %%%%584,307 1.82 %Collateralized loan obligations478,203 2.70 %— — %— — %— — %478,203 2.70 %
Corporate debt securitiesCorporate debt securities%150,108 4.82 %18,512 5.73 %%168,620 4.91 %Corporate debt securities— — %149,641 4.71 %13,630 5.73 %— — %163,271 4.80 %
Total securities available-for-saleTotal securities available-for-sale$709,698 1.64 %$161,468 4.62 %$107,006 2.41 %$374,982 2.12 %$1,353,154 2.17 %Total securities available-for-sale$577,867 2.52 %$159,271 4.56 %$60,513 2.52 %$67,784 2.29 %$865,435 2.87 %
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NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
The following table presents the balances in our loan portfolio as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2021
December 31,
2020
($ in thousands)June 30,
2022
December 31,
2021
Commercial:Commercial:Commercial:
Commercial and industrial(1)Commercial and industrial(1)$2,070,910 $2,088,308 Commercial and industrial(1)$2,433,464 $2,668,984 
Commercial real estateCommercial real estate871,790 807,195 Commercial real estate1,204,414 1,311,105 
MultifamilyMultifamily1,325,770 1,289,820 Multifamily1,572,308 1,361,054 
SBA(1)(2)
SBA(1)(2)
253,924 273,444 
SBA(1)(2)
92,235 205,548 
ConstructionConstruction150,557 176,016 Construction228,341 181,841 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage1,288,176 1,230,236 Single family residential mortgage1,832,279 1,420,023 
Other consumerOther consumer24,350 33,386 Other consumer88,223 102,925 
Total loans(2)
Total loans(2)
$5,985,477 $5,898,405 
Total loans(2)
$7,451,264 $7,251,480 
Allowance for loan lossesAllowance for loan losses(75,885)(81,030)Allowance for loan losses(93,793)(92,584)
Loans receivable, netLoans receivable, net$5,909,592 $5,817,375 Loans receivable, net$7,357,471 $7,158,896 
(1)Includes 994 PPP loans totaling $193.9 million, netwarehouse lending balances of unamortized loan fees totaling $3.9 million$1.16 billion and $1.60 billion at June 30, 20212022 and 949 PPP loans totaling $210.0 million, net of unamortized loan fees totaling $1.6 million at December 31, 2020.2021.
(2)Includes net deferred loan origination costs (fees) and premiums (discounts) of $7.9 million and $6.279 PPP loans totaling $28.4 million at June 30, 20212022 and 397 PPP loans totaling $123.1 million at December 31, 2020.2021.

The following table presents the balances of total loans as of the dates indicated:
($ in thousands)June 30,
2022
December 31,
2021
Unpaid principal balance$7,436,887 $7,245,952 
Unamortized net premiums25,960 18,005 
Unamortized net deferred (fees) costs(902)819 
Unamortized SBA PPP fees(21)(831)
Fair value adjustment(1)
(10,660)(12,465)
Total loans$7,451,264 $7,251,480 
(1)At June 30, 2022. includes $9.0 million related to the PMB Acquisition, of which $4.3 million related to PCD loans. At December 31, 2021, includes $10.6 million related to the PMB Acquisition, of which $3.9 million related to PCD loans.

Credit Quality Indicators
We categorize loans into risk categories based on relevant information about the ability of borrowers to repay their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We perform a historical loss analysis that is combined with a comprehensive loan to value analysis to analyze the associated risks in the current loan portfolio. We analyze loans individually and grade each loan for credit risk. This analysis includes all loans delinquent over 60 days and non-homogeneous loans such as commercial and commercial real estate loans. We use the following definitions for credit risk ratings:
Pass: Loans risk ratedclassified as pass are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful”.“Doubtful.”
Special Mention: Loans risk rated as special mention have a potential weaknessesweakness that deservedeserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or of our credit position at some future date.
Substandard: Loans risk rated as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so risk ratedclassified have a well-defined weaknessesweakness or weaknessesa weakness that jeopardizejeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.
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Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.



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The following table presents the risk categories for total loans by class of loans and origination year as of June 30, 2021:2022:
Term Loans Amortized Cost Basis by Origination YearTerm Loans Amortized Cost Basis by Origination Year
($ in thousands)($ in thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term
Total($ in thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term
Total
June 30, 2021
June 30, 2022June 30, 2022
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrialCommercial and industrial
PassPass$63,904 $78,232 $67,139 $54,977 $47,160 $110,094 $1,537,335 $12,107 $1,970,948 Pass$151,151 $217,900 $69,281 $74,539 $82,341 $181,285 $1,528,413 $11,741 $2,316,651 
Special mentionSpecial mention3,373 6,238 12,438 12,188 5,909 4,497 7,456 52,099 Special mention3,367 5,373 30 516 1,877 18,566 13,160 2,516 45,405 
SubstandardSubstandard16,983 5,056 9,000 13,194 3,479 47,712 Substandard— 1,265 4,586 14,162 12,377 3,207 35,359 452 71,408 
DoubtfulDoubtful151 151 Doubtful— — — — — — — — — 
Commercial and industrialCommercial and industrial63,904 81,605 90,360 72,471 59,348 125,003 1,555,026 23,193 2,070,910 Commercial and industrial154,518 224,538 73,897 89,217 96,595 203,058 1,576,932 14,709 2,433,464 
Commercial real estateCommercial real estateCommercial real estate
PassPass184,810 66,509 137,581 164,619 54,366 217,358 2,112 1,578 828,933 Pass188,712 385,057 61,027 118,169 161,165 271,356 1,167 66 1,186,719 
Special mentionSpecial mention9,330 13,466 3,762 26,558 Special mention— — — — 1,909 1,770 — — 3,679 
SubstandardSubstandard510 14,648 15,158 Substandard— — — — 4,188 8,936 892 — 14,016 
DoubtfulDoubtful1,141 1,141 Doubtful— — — — — — — — — 
Commercial real estateCommercial real estate184,810 66,509 138,091 173,949 54,366 246,613 5,874 1,578 871,790 Commercial real estate188,712 385,057 61,027 118,169 167,262 282,062 2,059 66 1,204,414 
MultifamilyMultifamilyMultifamily
PassPass201,010 211,775 322,319 246,988 97,009 189,812 1,268,917 Pass424,820 405,151 158,545 263,048 116,158 160,374 9,384 — 1,537,480 
Special mentionSpecial mention20,862 34,046 54,908 Special mention— — 4,968 — 11,165 — — — 16,133 
SubstandardSubstandard1,945 1,945 Substandard— — — — — 18,695 — — 18,695 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
MultifamilyMultifamily201,010 211,775 343,181 246,988 97,009 225,803 4 0 1,325,770 Multifamily424,820 405,151 163,513 263,048 127,323 179,069 9,384  1,572,308 
SBASBASBA
PassPass134,635 68,126 7,603 1,188 3,520 22,325 760 355 238,512 Pass5,310 32,808 9,532 2,453 1,276 23,115 628 156 75,278 
Special mentionSpecial mention1,743 200 1,220 3,168 Special mention— — — 3,909 219 1,091 — 5,221 
SubstandardSubstandard3,883 6,392 251 1,237 11,763 Substandard— — 338 190 385 9,361 666 796 11,736 
DoubtfulDoubtful391 90 481 Doubtful— — — — — — — — — 
SBASBA134,635 68,126 9,346 1,579 7,603 29,937 1,011 1,687 253,924 SBA5,310 32,808 9,870 6,552 1,880 33,567 1,294 954 92,235 
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ConstructionConstructionConstruction
PassPass15,611 39,643 27,224 18,345 40,620 141,443 Pass52,355 86,325 30,183 10,288 15,223 25,446 (26)— 219,794 
Special mentionSpecial mention1,537 7,577 9,114 Special mention— — — — — 8,547 — — 8,547 
SubstandardSubstandardSubstandard— — — — — — — — — 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
ConstructionConstruction15,611 39,643 27,224 19,882 40,620 7,577 0 0 150,557 Construction52,355 86,325 30,183 10,288 15,223 33,993 (26) 228,341 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgageSingle family residential mortgage
PassPass318,744 149,166 91,340 188,589 119,392 372,782 14,032 1,254,045 Pass473,398 815,560 77,676 50,930 102,538 290,831 6,135 — 1,817,068 
Special mentionSpecial mention3,132 696 7,174 11,002 Special mention651 222 — 670 902 3,547 — 226 6,218 
SubstandardSubstandard6,450 1,738 14,690 251 23,129 Substandard— — — 339 6,091 2,563 — — 8,993 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
Single family residential mortgageSingle family residential mortgage318,744 149,166 91,340 198,171 121,826 394,646 14,283 0 1,288,176 Single family residential mortgage474,049 815,782 77,676 51,939 109,531 296,941 6,135 226 1,832,279 
Other consumerOther consumerOther consumer
PassPass499 21 1,829 19,845 1,965 24,159 Pass12,734 19,886 10,469 6,538��3,843 19,725 12,893 1,639 87,727 
Special mentionSpecial mention28 64 92 Special mention— — — — 21 63 58 145 
SubstandardSubstandard99 99 Substandard— — 59 — 73 35 — 184 351 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
Other consumerOther consumer499 0 0 21 0 1,857 20,008 1,965 24,350 Other consumer12,734 19,886 10,528 6,541 3,916 19,781 12,956 1,881 88,223 
Total loansTotal loans$919,213 $616,824 $699,542 $713,061 $380,772 $1,031,436 $1,596,206 $28,423 $5,985,477 Total loans$1,312,498 $1,969,547 $426,694 $545,754 $521,730 $1,048,471 $1,608,734 $17,836 $7,451,264 
Total loansTotal loansTotal loans
PassPass$919,213 $613,451 $653,206 $674,727 $362,067 $914,200 $1,574,088 $16,005 $5,726,957 Pass$1,308,480 $1,962,687 $416,713 $525,965 $482,544 $972,132 $1,558,594 $13,602 $7,240,717 
Special mentionSpecial mention3,373 28,843 26,437 13,084 69,420 8,323 7,461 156,941 Special mention4,018 5,595 4,998 5,098 16,072 33,542 13,223 2,802 85,348 
SubstandardSubstandard17,493 11,506 5,621 46,675 13,795 4,716 99,806 Substandard— 1,265 4,983 14,691 23,114 42,797 36,917 1,432 125,199 
DoubtfulDoubtful391 1,141 241 1,773 Doubtful— — — — — — — — — 
Total loansTotal loans$919,213 $616,824 $699,542 $713,061 $380,772 $1,031,436 $1,596,206 $28,423 $5,985,477 Total loans$1,312,498 $1,969,547 $426,694 $545,754 $521,730 $1,048,471 $1,608,734 $17,836 $7,451,264 



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The following table presents the risk categories for total loans by class of loans and origination year as of December 31, 2020:2021:
Term Loans Amortized Cost Basis by Origination YearTerm Loans Amortized Cost Basis by Origination Year
($ in thousands)($ in thousands)20202019201820172016PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term
Total($ in thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term
Total
December 31, 2020
December 31, 2021December 31, 2021
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrialCommercial and industrial
PassPass$99,015 $78,783 $70,248 $52,786 $44,536 $92,129 $1,572,259 $9,945 $2,019,701 Pass$254,218 $81,177 $71,950 $78,461 $56,439 $110,490 $1,888,126 $9,679 $2,550,540 
Special mentionSpecial mention928 2,748 7,986 1,574 2,271 1,500 225 17,232 Special mention1,206 5,971 13,721 835 7,272 9,846 20,460 6,348 65,659 
SubstandardSubstandard13,937 6,262 4,618 9,264 12,598 4,696 51,375 Substandard241 17,853 11,378 3,374 117 17,429 2,391 52,785 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
Commercial and industrialCommercial and industrial99,015 93,648 79,258 65,390 46,110 103,664 1,586,357 14,866 2,088,308 Commercial and industrial255,426 87,389 103,524 90,674 67,085 120,453 1,926,015 18,418 2,668,984 
Commercial real estateCommercial real estateCommercial real estate
PassPass75,432 150,731 192,831 63,144 91,454 182,756 2,682 1,582 760,612 Pass465,524 82,759 140,108 192,263 85,755 317,941 8,416 71 1,292,837 
Special mentionSpecial mention9,452 2,518 14,754 3,761 30,485 Special mention— — — 1,925 — 2,920 — — 4,845 
SubstandardSubstandard16,098 16,098 Substandard— — 506 — — 9,084 3,833 — 13,423 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
Commercial real estateCommercial real estate75,432 150,731 202,283 63,144 93,972 213,608 6,443 1,582 807,195 Commercial real estate465,524 82,759 140,614 194,188 85,755 329,945 12,249 71 1,311,105 
MultifamilyMultifamilyMultifamily
PassPass239,449 407,532 275,881 110,105 97,160 154,841 27 1,284,995 Pass410,958 208,396 315,119 157,640 61,457 158,464 — 1,312,038 
Special mentionSpecial mention2,050 803 2,853 Special mention— 1,988 — 11,261 — 33,065 — — 46,314 
SubstandardSubstandard1,972 1,972 Substandard— — — — — 2,702 — — 2,702 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
MultifamilyMultifamily239,449 409,582 275,881 110,105 97,160 157,616 27 0 1,289,820 Multifamily410,958 210,384 315,119 168,901 61,457 194,231 4  1,361,054 
SBASBASBA
PassPass211,962 14,082 1,260 3,746 11,087 18,589 3,111 1,014 264,851 Pass106,749 23,972 8,049 1,957 10,836 28,495 928 143 181,129 
Special mentionSpecial mention1,768 212 415 874 3,275 Special mention— 1,586 3,618 236 — 596 — 6,040 
SubstandardSubstandard1,319 682 1,855 226 755 4,837 Substandard— 5,888 — 390 3,358 7,245 599 899 18,379 
DoubtfulDoubtful390 91 481 Doubtful— — — — — — — — — 
SBASBA211,962 15,850 1,650 5,277 12,184 21,318 3,337 1,866 273,444 SBA106,749 31,446 11,667 2,583 14,194 36,336 1,527 1,046 205,548 
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ConstructionConstructionConstruction
PassPass41,677 30,387 45,397 50,024 167,485 Pass67,074 32,995 29,038 17,139 25,485 — — — 171,731 
Special mentionSpecial mention1,537 6,994 8,531 Special mention— — — 1,607 — 8,503 — — 10,110 
SubstandardSubstandardSubstandard— — — — — — — — — 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
ConstructionConstruction41,677 30,387 46,934 50,024 6,994 0 0 0 176,016 Construction67,074 32,995 29,038 18,746 25,485 8,503   181,841 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgageSingle family residential mortgage
PassPass149,382 140,129 271,667 161,332 237,285 227,711 15,252 1,202,758 Pass713,844 96,339 67,075 140,329 88,123 277,247 12,828 — 1,395,785 
Special mentionSpecial mention1,837 688 4,868 4,460 11,853 Special mention— 1,644 339 910 692 6,838 — — 10,423 
SubstandardSubstandard157 491 1,079 4,978 8,920 15,625 Substandard— — — 11,005 975 1,601 — 234 13,815 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
Single family residential mortgageSingle family residential mortgage149,382 140,286 273,995 163,099 247,131 241,091 15,252 0 1,230,236 Single family residential mortgage713,844 97,983 67,414 152,244 89,790 285,686 12,828 234 1,420,023 
Other consumerOther consumerOther consumer
PassPass38 47 1,876 27,644 2,218 31,823 Pass26,179 13,556 8,891 5,265 9,038 15,951 21,327 2,331 102,538 
Special mentionSpecial mention30 1,185 1,215 Special mention— — — — 25 63 — 92 
SubstandardSubstandard274 74 348 Substandard— 61 14 148 46 26 — — 295 
DoubtfulDoubtfulDoubtful— — — — — — — — — 
Other consumerOther consumer38 0 47 0 0 1,906 29,103 2,292 33,386 Other consumer26,179 13,617 8,909 5,413 9,084 16,002 21,390 2,331 102,925 
Total loansTotal loans$816,955 $840,484 $880,048 $457,039 $503,551 $739,203 $1,640,519 $20,606 $5,898,405 Total loans$2,045,754 $556,573 $676,285 $632,749 $352,850 $991,156 $1,974,013 $22,100 $7,251,480 
Total loansTotal loansTotal loans
PassPass$816,955 $821,644 $857,331 $441,137 $481,522 $677,902 $1,620,975 $14,759 $5,732,225 Pass$2,044,546 $539,194 $640,230 $593,054 $337,133 $908,588 $1,931,629 $12,224 $7,006,598 
Special mentionSpecial mention4,746 15,574 8,886 16,369 23,192 6,446 231 75,444 Special mention1,206 11,189 17,682 16,774 7,964 61,793 20,523 6,352 143,483 
SubstandardSubstandard14,094 6,753 7,016 5,660 38,109 13,098 5,525 90,255 Substandard6,190 18,373 22,921 7,753 20,775 21,861 3,524 101,399 
DoubtfulDoubtful390 91 481 Doubtful— — — — — — — — — 
Total loansTotal loans$816,955 $840,484 $880,048 $457,039 $503,551 $739,203 $1,640,519 $20,606 $5,898,405 Total loans$2,045,754 $556,573 $676,285 $632,749 $352,850 $991,156 $1,974,013 $22,100 $7,251,480 

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Past Due Loans
The following table presents the aging of the recorded investment in past due loans, excluding accrued interest receivable (which is not considered to be material), by class of loans as of the dates indicated:
($ in thousands)($ in thousands)30 - 59 Days Past Due60 - 89 Days Past DueGreater than 89 Days Past dueTotal Past DueCurrentTotal($ in thousands)30 - 59 Days Past Due60 - 89 Days Past DueGreater than 89 Days Past dueTotal Past DueCurrentTotal
June 30, 2021
Non-Traditional Mortgage (NTM) loans:
Single family residential mortgage$7,191 $$2,669 $9,860 $451,114 $460,974 
Other consumer1,601 1,601 
Total NTM loans7,191 2,669 9,860 452,715 462,575 
Traditional loans:
June 30, 2022June 30, 2022
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial587 3,157 3,753 2,067,157 2,070,910 Commercial and industrial3,433 2,567 7,204 13,204 2,420,260 2,433,464 
Commercial real estateCommercial real estate911 911 870,879 871,790 Commercial real estate893 — — 893 1,203,521 1,204,414 
MultifamilyMultifamily796 796 1,324,974 1,325,770 Multifamily— — — — 1,572,308 1,572,308 
SBASBA880 6,942 7,822 246,102 253,924 SBA4,766 115 10,087 14,968 77,267 92,235 
ConstructionConstruction150,557 150,557 Construction— — — — 228,341 228,341 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage6,497 1,023 4,319 11,839 815,363 827,202 Single family residential mortgage23,226 2,848 6,430 32,504 1,799,775 1,832,279 
Other consumerOther consumer22,749 22,749 Other consumer437 — 184 621 87,602 88,223 
Total traditional loans8,182 1,610 15,329 25,121 5,497,781 5,522,902 
TotalTotal$15,373 $1,610 $17,998 $34,981 $5,950,496 $5,985,477 Total$32,755 $5,530 $23,905 $62,190 $7,389,074 $7,451,264 
December 31, 2020
NTM loans:
Single family residential mortgage$4,200 $641 $6,548 $11,389 $424,126 $435,515 
Other consumer1,598 1,598 
Total NTM loans4,200 641 6,548 11,389 425,724 437,113 
Traditional loans:
December 31, 2021December 31, 2021
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial67 4,284 4,351 2,083,957 2,088,308 Commercial and industrial9,342 1,351 9,503 20,196 2,648,788 2,668,984 
Commercial real estateCommercial real estate807,195 807,195 Commercial real estate— — — — 1,311,105 1,311,105 
MultifamilyMultifamily1,289,820 1,289,820 Multifamily786 — — 786 1,360,268 1,361,054 
SBASBA354 626 3,062 4,042 269,402 273,444 SBA987 2,360 15,941 19,288 186,260 205,548 
ConstructionConstruction176,016 176,016 Construction— — — — 181,841 181,841 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage6,836 980 3,742 11,558 783,163 794,721 Single family residential mortgage24,867 — 7,076 31,943 1,388,080 1,420,023 
Other consumerOther consumer216 61 277 31,511 31,788 Other consumer449 — 89 538 102,387 102,925 
Total traditional loans7,473 1,667 11,088 20,228 5,441,064 5,461,292 
TotalTotal$11,673 $2,308 $17,636 $31,617 $5,866,788 $5,898,405 Total$36,431 $3,711 $32,609 $72,751 $7,178,729 $7,251,480 
In accordance with regulatory guidance, borrowers that are on forbearance or deferment, which were current prior to becoming affected by the global pandemic are not be reported as past due.
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Nonaccrual Loans
The following table presents nonaccrual loans as of the dates indicated:
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)NTM LoansTraditional LoansTotal
Nonaccrual Loans
Nonaccrual Loans with no ACLNTM LoansTraditional LoansTotal
Nonaccrual Loans
Nonaccrual Loans with no ACL($ in thousands)Total
Nonaccrual Loans
Nonaccrual Loans with no ACLTotal
Nonaccrual Loans
Nonaccrual Loans with no ACL
Nonaccrual loansNonaccrual loansNonaccrual loans
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$$12,906 $12,906 $12,640 $$13,821 $13,821 $13,088 Commercial and industrial$25,380 $6,413 $28,594 $9,137 
Commercial real estateCommercial real estate6,553 6,553 5,412 4,654 4,654 4,654 Commercial real estate893 893 — — 
SBASBA10,633 10,633 2,667 3,749 3,749 648 SBA10,537 5,163 16,653 11,443 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage9,238 11,969 21,207 18,677 8,697 4,822 13,519 13,519 Single family residential mortgage7,341 3,412 7,076 7,076 
Other consumerOther consumer157 157 157 Other consumer292 292 235 235 
Total nonaccrual loansTotal nonaccrual loans$9,238 $42,061 $51,299 $39,396 $8,697 $27,203 $35,900 $32,066 Total nonaccrual loans$44,443 $16,173 $52,558 $27,891 

At June 30, 20212022 and December 31, 2020,2021, there were 0 and $728 thousand ofno loans that were past due 90 days or more and still accruing.
The non-traditional mortgage (“NTM”) loans on nonaccrual status included $5.9 million
26

Table of Green Loans and $3.4 million of Interest Only loans at June 30, 2021 compared to $4.0 million of Green Loans and $4.7 million of Interest Only loans at December 31, 2020.Contents

Other Real Estate Owned, Net and Loans in Process of Foreclosure
At June 30, 2022 and December 31, 2021, there was no other real estateowned consisted of one SFR property, totaling $3.3 million.
owned. At June 30, 2021 and December 31, 2020,2022, there was 0were 4 consumer mortgage loanloans totaling $4.5 million secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction. There were no consumer mortgage loans secured by residential real estate properties in foreclosure at December 31, 2021.

Allowance for Credit Losses
The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables (MEVs) released by ourthe model provider during June 2021. In contrast to the March 20212022. The published forecasts the assumptions in the June 2021 forecasts generally reflect a more favorable view of the economy (i.e.consider rising inflation, higher GDP growth rates and lower unemployment rates). While the June 2021 forecasts reflect an improving economy with the rollout of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variantsoil prices, ongoing supply chain issues and the ultimate pace of the recovery. Accordingly, our economic assumptionsmilitary conflict between Russia and the resulting ACL level and provision reversal consider both the positive assumptions and potential uncertainties. Ukraine, among other factors.
The ACL also incorporatedincorporates qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in various segments of the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better than or worse than current estimates.
The ACL process involves subjective and complex judgments as well as adjustments for numerous factors including those described in the federal banking agencies' joint interagency policy statement on ALL, which include underwriting experience and collateral value changes, among others.
We have established credit risk management processes that include regular management review of the loan portfolio to identify problem loans. During the ordinary course of business, management may become aware of borrowers who may not be able to fulfill their contractual payment requirements within the loan agreements. Such loans are subject to increased monitoring. Consideration is given to placing these loans on nonaccrual status, assessing the need for additional allowance for loan loss, and partially or fully charging off the principal balance. We maintain the allowance for loan losses at a level that is considered adequate to cover the current expected credit losses in the loan portfolio.
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The reserve for unfunded loan commitments is established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. At June 30, 20212022 and December 31, 2020,2021, the reserve for unfunded loan commitments was $3.8$5.9 million and $3.2$5.6 million, respectively, and was included in accrued expenses and other liabilities on the consolidated statements of financial condition.
The credit risk monitoring system is designed to identify impaired and potential problem loans, perform periodic evaluation of impairment, and determine the adequacy of the allowance for credit losses in a timely manner. In addition, management has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that we maintain an adequate allowance for credit losses. Further, the Board of Directors provides oversight and guidance for management’s allowance evaluation process.
The following table presents a summary of activity in the ACL for the periods indicated:
Three Months Ended June 30,
($ in thousands)20212020
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$79,353 $3,360 $82,713 $78,243 $3,888 $82,131 
Loans charged off(886)(886)
Recoveries of loans previously charged off26 26 608 608 
Net (charge-offs) recoveries(860)(860)608 608 
(Reversal of) provision for credit losses(2,608)454 (2,154)11,519 307 11,826 
Balance at end of period$75,885 $3,814 $79,699 $90,370 $4,195 $94,565 

Six Months Ended June 30,Three Months Ended June 30,
($ in thousands)($ in thousands)20212020($ in thousands)20222021
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of periodBalance at beginning of period$81,030 $3,183 $84,213 $57,649 $4,064 $61,713 Balance at beginning of period$93,226 $5,405 $98,631 $79,353 $3,360 $82,713 
Impact of adopting ASU 2016-137,609 (1,226)6,383 
Loans charged off(1,451)(1,451)(2,076)(2,076)
Recoveries of loans previously charged off198 198 958 958 
Net charge-offs(1,253)(1,253)(1,118)(1,118)
Charge-offsCharge-offs(494)— (494)(886)— (886)
RecoveriesRecoveries1,561 — 1,561 26 — 26 
Net recoveries (charge-offs)Net recoveries (charge-offs)1,067 — 1,067 (860)— (860)
(Reversal of) provision for credit losses(Reversal of) provision for credit losses(3,892)631 (3,261)26,230 1,357 27,587 (Reversal of) provision for credit losses(500)500 — (2,608)454 (2,154)
Balance at end of periodBalance at end of period$75,885 $3,814 $79,699 $90,370 $4,195 $94,565 Balance at end of period$93,793 $5,905 $99,698 $75,885 $3,814 $79,699 


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Six Months Ended June 30,
($ in thousands)20222021
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$92,584 $5,605 $98,189 $81,030 $3,183 $84,213 
Charge-offs(725)— (725)(1,451)— (1,451)
Recoveries33,776 — 33,776 198 — 198 
Net charge-offs33,051 — 33,051 (1,253)— (1,253)
(Reversal of) provision for credit losses(31,842)300 (31,542)(3,892)631 (3,261)
Balance at end of period$93,793 $5,905 $99,698 $75,885 $3,814 $79,699 
During the six months ended June 30, 2022, total recoveries included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019. This recovery resulted in a reversal of provision for credit losses during the same period.

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Accrued interest receivable on loans receivable, net totaled $23.4$26.6 million and $24.7$25.8 million at June 30, 20212022 and December 31, 2020,2021, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.
The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans as of or for the three and six months ended June 30, 2021:2022:
($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:
Three Months Ended June 30, 2021:
Balance at March 31, 2021$19,703 $17,100 $23,884 $3,451 $5,552 $9,161 $502 $79,353 
Charge-offs(500)(386)(886)
Recoveries23 26 
Net charge-offs(477)(383)(860)
(Reversal of) provision for credit losses930 (676)(2,481)628 (818)(53)(138)(2,608)
Balance at June 30, 2021$20,156 $16,424 $21,403 $3,696 $4,734 $9,108 $364 $75,885 
Six Months Ended June 30, 2021:
Balance at December 31, 2020$20,608 $19,074 $22,512 $3,145 $5,849 $9,191 $651 $81,030 
Charge-offs(1,065)(386)(1,451)
Recoveries68 129 198 
Net (charge-offs) recoveries(997)(257)(1,253)
Provision for (reversal of) credit losses545 (2,650)(1,109)808 (1,115)(83)(288)(3,892)
Balance at June 30, 2021$20,156 $16,424 $21,403 $3,696 $4,734 $9,108 $364 $75,885 

($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:
Three Months Ended June 30, 2022:
Balance at March 31, 2022$39,967 $16,490 $15,337 $3,041 $6,268 $11,029 $1,094 $93,226 
Charge-offs(138)— — (139)— — (217)(494)
Recoveries1,400 — — — 154 1,561 
Net recoveries (charge-offs)1,262 — — (136)— 154 (213)1,067 
Provision for (reversal of) credit losses - loans184 (748)341 128 (2,013)1,622 (14)(500)
Balance at June 30, 2022$41,413 $15,742 $15,678 $3,033 $4,255 $12,805 $867 $93,793 
Six Months Ended June 30, 2022:
Balance at December 31, 2021$33,557 $21,727 $17,893 $3,017 $5,622 $9,608 $1,160 $92,584 
Charge-offs(320)— — (152)— (10)(243)(725)
Recoveries32,817 — — 761 — 192 33,776 
Net recoveries (charge-offs)32,497 — — 609 — 182 (237)33,051 
Provision for (reversal of) credit losses - loans(24,641)(5,985)(2,215)(593)(1,367)3,015 (56)(31,842)
Balance at June 30, 2022$41,413 $15,742 $15,678 $3,033 $4,255 $12,805 $867 $93,793 
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The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans as of or for the three and six months ended June 30, 2020:2021:
($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:
Three Months Ended June 30, 2020:
Balance at March 31, 2020$23,573 $13,620 $20,072 $3,652 $7,052 $9,593 $681 $78,243 
Charge-offs
Recoveries119 488 608 
Net recoveries119 488 608 
Provision for (reversal of) credit losses2,926 3,752 5,033 532 (377)(416)69 11,519 
Balance at June 30, 2020$26,618 $17,372 $25,105 $4,184 $6,675 $9,665 $751 $90,370 
Six Months Ended June 30, 2020:
Balance at December 31, 2019$22,353 $5,941 $11,405 $3,120 $3,906 $10,486 $438 $57,649 
Adoption of ASU No. 2016-13662 4,847 1,809 388 103 (420)220 7,609 
Charge-offs(1,164)(356)(552)(4)(2,076)
Recoveries149 121 639 49 958 
Net (charge-offs) recoveries(1,015)(235)87 45 (1,118)
Provision for (reversal of) credit losses4,618 6,584 11,891 911 2,666 (488)48 26,230 
Balance at June 30, 2020$26,618 $17,372 $25,105 $4,184 $6,675 $9,665 $751 $90,370 
($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:
Three Months Ended June 30, 2021:
Balance at March 31, 2021$19,703 $17,100 $23,884 $3,451 $5,552 $9,161 $502 $79,353 
Charge-offs(500)— — (386)— — — (886)
Recoveries23 — — — — — 26 
Net (charge-offs) recoveries(477)— — (383)— — — (860)
(Reversal of) provision for credit losses - loans930 (676)(2,481)628 (818)(53)(138)(2,608)
Balance at June 30, 2021$20,156 $16,424 $21,403 $3,696 $4,734 $9,108 $364 $75,885 
Six Months Ended June 30, 2021:
Balance at December 31, 2020$20,608 $19,074 $22,512 $3,145 $5,849 $9,191 $651 $81,030 
Charge-offs(1,065)— — (386)— — — (1,451)
Recoveries68 — — 129 — — 198 
Net (charge-offs) recoveries(997)— — (257)— — (1,253)
Provision for (reversal of) credit losses - loans545 (2,650)(1,109)808 (1,115)(83)(288)(3,892)
Balance at June 30, 2021$20,156 $16,424 $21,403 $3,696 $4,734 $9,108 $364 $75,885 
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Collateral Dependent Loans
A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are evaluated individually and the ACL is determined based on the amount by which amortized costs exceed the estimated fair value of the collateral, adjusted for estimated selling costs.
Collateral dependent loans consisted of the following as of June 30, 2021 and December 31, 2020:the dates indicated:
June 30, 2021June 30, 2022
Real EstateReal Estate
($ in thousands)($ in thousands)CommercialResidentialBusiness AssetsTotal($ in thousands)CommercialResidentialBusiness AssetsAutomobileTotal
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial5,245 4,798 10,043 Commercial and industrial$12,349 $— $4,316 $— $16,665 
Commercial real estateCommercial real estate3,482 1,930 5,412 Commercial real estate893 — — — 893 
SBASBA72 4,461 5,901 10,434 SBA98 4,710 5,729 — 10,537 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage26,870 26,870 Single family residential mortgage— 8,789 — — 8,789 
Other consumerOther consumer— 184 — 111 295 
Total loansTotal loans$8,799 $33,261 $10,699 $52,759 Total loans$13,340 $13,683 $10,045 $111 $37,179 
December 31, 2020December 31, 2021
Real EstateReal Estate
($ in thousands)($ in thousands)CommercialResidentialBusiness AssetsTotal($ in thousands)CommercialResidentialBusiness AssetsAutomobileTotal
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial5,492 4,965 10,457 Commercial and industrial$13,518 $37 $4,776 $— $18,331 
Commercial real estate2,644 2,010 4,654 
SBASBA349 497 2,750 3,596 SBA689 4,458 11,511 — 16,658 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage17,820 17,820 Single family residential mortgage— 14,012 — — 14,012 
Other consumerOther consumer157 157 Other consumer— — — 235 235 
Total loansTotal loans$8,485 $20,484 $7,715 $36,684 Total loans$14,207 $18,507 $16,287 $235 $49,236 

Troubled Debt Restructurings
TDR loans consisted of the following as of the dates indicated:
June 30, 2021December 31, 2020
($ in thousands)($ in thousands)NTM
Loans
Traditional LoansTotalNTM
Loans
Traditional LoansTotal($ in thousands)June 30,
2022
December 31,
2021
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$$3,220 $3,220 $$3,884 $3,884 Commercial and industrial$19,778 $5,241 
Commercial real estateCommercial real estate4,187 4,243 
SBASBA265 265 265 265 SBA522 265 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage3,435 2,229 5,664 2,631 2,217 4,848 Single family residential mortgage1,448 6,935 
Other consumer
TotalTotal$3,435 $5,714 $9,149 $2,631 $6,366 $8,997 Total$25,935 $16,684 

We had commitments to lend to customers with outstanding loans that were classified as TDRs of $769 thousand and $63 thousand at both June 30, 20212022 and December 31, 2020.2021. Accruing TDRs were $6.0$10.9 million and nonaccrual TDRs were $3.1$15.0 million at June 30, 2021,2022, compared to accruing TDRs of $4.7$12.5 million and nonaccrual TDRs of $4.3$4.1 million at December 31, 2020.2021. The increase in TDRs during the six months ended June 30, 2022 was due mostly to the modification of a non-performing PCD loan acquired in the PMB acquisition.
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The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:
Three Months EndedSix Months EndedThree Months EndedSix Months Ended
($ in thousands)($ in thousands)Number of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentNumber of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment($ in thousands)Number of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentNumber of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment
June 30, 2022June 30, 2022
Commercial:Commercial:
Commercial and industrial(1)
Commercial and industrial(1)
— $— $— $12,840 $12,840 
SBASBA833 833 833 833 
TotalTotal$833 $833 $13,673 $13,673 
June 30, 2021June 30, 2021June 30, 2021
Consumer:Consumer:Consumer:
Single family residential mortgage$$1,800 1,800 
Single family residential mortgage(1)
Single family residential mortgage(1)
— $— $— $1,800 $1,800 
TotalTotal$1,800 $1,800 Total— $— $— $1,800 $1,800 
June 30, 2020
Commercial:
Commercial and industrial$$$5,000 $5,000 
Total$$$5,000 $5,000 

(1) Modifications during the three and six months ended June 30, 2022 and 2021 consisted of extensions of maturity.
We consider a TDR to be in payment default once it becomes 30 days or more past due following a modification. During the three and six months ended June 30, 20212022 and 2020,2021, there were 0no loans that were modified as a TDR during the past 12 months that had subsequent payment defaults.
The following table summarizes TDRs by modification type for the period indicated:
Six Months Ended
Modification Type
Extension of MaturityTotal
($ in thousands)CountAmountCountAmount
June 30, 2021
Consumer:
Single family residential mortgage1,800 1,800 
Total1 $1,800 1 $1,800 
June 30, 2020
Commercial:
Commercial and industrial$5,000 $5,000 
Total1 $5,000 1 $5,000 

Purchases, Sales, and Transfers
From time to time, we purchase and sell loans in the secondary market. During the three and six months ended June 30, 20212022, we purchased loans aggregating $233.1$277.2 million and $366.0$641.5 million. During the three and six months ended June 30, 2020,2021, we purchased loans aggregating $25.8$233.1 million and $366.0 million.
There were 0no loans transferred from (to)held for investment to loans held-for-sale and there were 0no sales of loans for the three and six months ended June 30, 20212022 and 2020.2021.

Non-Traditional Mortgage Loans (“NTM”)
Our NTM loans are included in our SFR mortgage portfolio includes 3and are comprised of interest only loans and Green Loans. As of June 30, 2022 and December 31, 2021, the NTM loans totaled $841.1 million, or 11.3% of total loans, and $635.3 million, or 8.8% of total loans, respectively.
We no longer originate SFR loans, however we have and may continue to purchase pools of loans that include NTM loans such as interest only loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the life of the loan. Interest only loans are primarily SFR first mortgage loans that generally have a 30 to 40-year term at the time of origination and include payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At June 30, 2022 and December 31, 2021, interest only loans totaled $833.6 million and $613.3 million. Green Loans are SFR first and second mortgage lines of credit with a linked checking account that allows all types of interest-only loans:deposits and withdrawals to be performed. Green Loans Interest Onlyare generally interest only for a 15-year term with a balloon payment due at maturity. At June 30, 2022 and December 31, 2021, Green Loans totaled $7.4 million and $21.9 million.
At June 30, 2022 and December 31, 2021, nonperforming NTM loans totaled zero and a small number of loans with the potential for negative amortization. The initial$4.0 million.
Non-Traditional Mortgage Performance Indicators
Our risk management policy and credit guidelines formonitoring include reviewing delinquency, FICO scores, and LTV ratios on the NTM portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, LTV ratio, property type, occupancy type, loan amount, and geography. Additionally, from an ongoing credit risk management perspective, weportfolio. We also continuously monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for NTMsNTM first lien loans are LTV ratios and for Green Loans are FICO scores. We review theAt June 30, 2022, our NTM loanfirst lien portfolio periodically by refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models ("AVMs") to confirm collateralhad a weighted average LTV of approximately 60%.

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values. We no longer originate NTM loans, however, loans may be purchased which meet the criteria to be considered NTM loans.
The following table presents the composition of the NTM portfolio, which are included in the single family residential mortgage portfolio, as of the dates indicated:
June 30, 2021December 31, 2020
($ in thousands)CountAmountPercentCountAmountPercent
Consumer:
Single family residential mortgage:
Green Loans (HELOC) - first liens42 $28,796 6.2 %48 $31,587 7.2 %
Interest Only - first liens290 430,488 93.1 %283 401,640 91.9 %
Negative amortization1,690 0.4 %2,288 0.5 %
Total NTM - first liens337 460,974 99.7 %339 435,515 99.6 %
Other consumer:
Green Loans (HELOC) - second liens1,601 0.3 %1,598 0.4 %
Total NTM - second liens1,601 0.3 %1,598 0.4 %
Total NTM loans342 $462,575 100.0 %344 $437,113 100.0 %
Total loans receivable$5,985,477 $5,898,405 
% of total NTM loans to total loans receivable7.7 %7.4 %

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET
At June 30, 20212022 and December 31, 2020,2021, we had goodwill of $37.1$95.1 million and $94.3 million. We evaluate goodwill for impairment as of October 1st each year, and more frequently if events or circumstances indicate that there may be impairment. We completed our most recent annual goodwill impairment test as of October 1, 20202021 and determined that 0no goodwill impairment existed.
The following table presents changes in the carrying amount of goodwill for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)2022202120222021
Goodwill, beginning of period$95,127 $37,144 $94,301 $37,144 
Goodwill adjustments for purchase accounting— — 826 — 
Goodwill, end of period$95,127 $37,144 $95,127 $37,144 
Accumulated impairment losses at end of period$2,100 $2,100 $2,100 $2,100 
During the six months ended June 30, 2022, goodwill was adjusted for fair value and deferred tax adjustments related to the PMB acquisition.
Core deposit intangibles are amortized over their useful lives ranging from four to of ten years. years and reviewed for impairment at least quarterly. As of June 30, 2021,2022, the weighted average remaining amortization period for core deposit intangibles was approximately 3.37.6 years.
($ in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
June 30, 2021
Core deposit intangibles$30,904 $28,835 $2,069 
December 31, 2020
Core deposit intangibles$30,904 $28,271 $2,633 
The following table presents changes in the carrying amount of intangible assets, net for the periods indicated:

Aggregate amortization of intangible assets was $282 thousand and $430 thousand for the three months ended June 30, 2021 and 2020 and $564 thousand and $859 thousand for the six months ended June 30, 2021 and 2020.
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)2022202120222021
Core deposit intangibles:
Balance, beginning of period$34,978 $30,904 $35,958 $30,904 
Core deposit intangible adjustments for purchase accounting— — (980)— 
Balance, end of period34,978 30,904 34,978 30,904 
Accumulated amortization:
Balance, beginning of period29,988 28,553 29,547 28,271 
Amortization of intangible assets313 282 754 564 
Balance, end of period30,301 28,835 30,301 28,835 
Intangible assets, net$4,677 $2,069 $4,677 $2,069 
The following table presents estimated future amortization expensesexpense of intangible assets, net as of June 30, 2021:2022:
($ in thousands)($ in thousands)Remainder of 2021202220232024Total($ in thousands)Remainder of 202220232024202520262027 and AfterTotal
Estimated future amortization expenseEstimated future amortization expense$518 $799 $517 $235 $2,069 Estimated future amortization expense$745 $1,092 $719 $420 $373 $1,328 $4,677 



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NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
FHLB Advances
The following table presents advances from the FHLB as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2021
December 31,
2020
($ in thousands)June 30,
2022
December 31,
2021
Fixed rate:Fixed rate:Fixed rate:
Outstanding balance (2)(1)
Outstanding balance (2)(1)
$411,000 $461,000 
Outstanding balance (2)(1)
$411,000 $411,000 
Interest rates ranging from (2)
Interest rates ranging from (2)
0.64 %%
Interest rates ranging from (2)
0.64 %0.64 %
Interest rates ranging toInterest rates ranging to3.32 %3.32 %Interest rates ranging to3.32 %3.32 %
Weighted average interest rateWeighted average interest rate2.53 %2.51 %Weighted average interest rate2.53 %2.53 %
Variable rate:Variable rate:Variable rate:
Outstanding balanceOutstanding balance$85,000 $85,000 Outstanding balance$105,000 $70,000 
Weighted average interest rateWeighted average interest rate0.15 %0.17 %Weighted average interest rate1.64 %0.20 %
(1)Excludes $5.6$4.3 million and $6.2$4.9 million of unamortized debt issuance costs at June 30, 20212022 and December 31, 2020.    
(2)Includes 0 and $5.0 million in FHLB recovery advances at June 30, 2021 and December 31, 2020 with an interest rate of 0.00% that matured of May 27, 2021.

Each advance is payable at its maturity date. Advances paid early are subject to a prepayment penalty. At the endAs of the second quarter of 2021,June 30, 2022, FHLB advances included $85.0$105.0 million in overnight borrowings with a weighted average interest rate of 1.64% and $411.0 million in term advances with a weighted average life of 4.53.5 years and weighted average interest rate of 2.53%.
AtInvestments securities with carrying value of $205.5 million as of June 30, 2021 and December 31, 2020, the2022 were pledged to secure FHLB advances. The Bank’s advances from the FHLB wereare also collateralized by certaina blanket lien on all real estate loans. Our secured borrowing capacity with the FHLB totaled $1.76 billion, of which the Bank was eligible to borrow an additional $985.4 million at June 30, 2022 based on qualifying loans with an aggregate unpaid principal balance of $2.06$2.38 billion and $2.37 billion. Based on this collateral, the Bank was eligible to borrow an additional $753.7 million at June 30, 2021.as of that date.
The Bank’s investment in capital stock of the FHLB of San Francisco totaled $17.3 million at June 30, 20212022 and December 31, 2020.2021.

FRB Borrowings
At June 30, 2021,2022, the CompanyBank had borrowing capacity with the Federal Reserve Bank of San Francisco (“Federal(the “Federal Reserve”) of $269.5$789.0 million, including the secured borrowing capacity through the Federal Reserve Discount Window and Borrower-in-Custody ("BIC") program. At June 30, 2021,2022, the Bank has pledged certain qualifying loans with an unpaid principal balance of $553.1 million$1.01 billion and securities with a carrying value of $8.9$123.2 million as collateral for these lines of credit. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were 0no secured borrowings from the FRB at June 30, 2022 and December 31, 2021
There were no borrowings under this arrangement for the three and six months ended June 30, 20212022 and 2020.2021.
The Bank’s investment in capital stock of the Federal Reserve totaled $27.2$34.2 million and $27.3 million at June 30, 20212022 and December 31, 20202021.

Other Borrowings
The Bank maintained available unsecured federal funds lines with 5 correspondent banks totaling $210.0 million, with 0no outstanding borrowings at June 30, 2021.2022. The Bank also has the ability to performaccess unsecured overnight borrowingborrowings from various financial institutions through the American Financial Exchange platform (AFX)("AFX"). The availability of such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled $441.0 million and $196.0$445.0 million at June 30, 20212022 and December 31, 2020.2021. Borrowings under the AFX totaled $125.0$85.0 million and 0$25.0 million at June 30, 20212022 and December 31, 2020.2021.
In December 2021, the holding company entered into a $50.0 million revolving line of credit, which matures on December 19, 2022. There were $13.0 million and zero in borrowings under this line of credit at June 30, 2022 and December 31, 2021. At June 30, 2022, we were in compliance with all covenants under our revolving line of credit.
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The Bank also maintained repurchase agreements and had 0no outstanding securities sold under agreements to repurchase at June 30, 20212022 and December 31, 2020.2021. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and the pledging of additional investment securities.

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NOTE 7 – LONG-TERM DEBT
The following table presents our long-term debt as of the dates indicated:
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)Par ValueUnamortized Debt Issuance Cost and DiscountPar ValueUnamortized Debt Issuance Cost and Discount($ in thousands)Interest
Rate
Maturity
Date
Par
Value
Unamortized Debt Issuance Cost and DiscountPar
Value
Unamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025$175,000 $(1,193)$175,000 $(1,291)
4.375% subordinated notes due October 30, 203085,000 (2,253)85,000 (2,394)
Senior notesSenior notes5.25%4/15/2025$175,000 $(910)$175,000 $(1,014)
Subordinated notesSubordinated notes4.375%10/30/203085,000 (2,030)85,000 (2,127)
PMB Statutory Trust III, junior subordinated debenturesPMB Statutory Trust III, junior subordinated debenturesLibor + 3.40%9/26/20327,217 — 7,217 — 
PMB Capital Trust III, junior subordinated debenturesPMB Capital Trust III, junior subordinated debenturesLibor + 2.00%10/8/203410,310 — 10,310 — 
TotalTotal$260,000 $(3,446)$260,000 $(3,685)Total$277,527 $(2,940)$277,527 $(3,141)

At June 30, 2021,2022, we were in compliance with all covenants under our long-term debt agreements.

NOTE 8 – INCOME TAXES
For the three and six months ended June 30, 2022, income tax expense was $10.2 million and $28.9 million, resulting in an effective tax rate of 27.6% and 27.8%. For the three and six months ended June 30, 2021, income tax expense was $6.6 million and $8.9 million, resulting in an effective tax rate of 25.6% and 20.9%. ForThe effective tax rate for the three and six months ended June 30, 2020, income2022 and for the three months ended June 30, 2021, differs from the combined federal and state statutory rate for the consolidated company of 28.9% due primarily to various permanent tax benefit was $5.3 milliondifferences, tax credits and $7.5 million and theother discrete tax items that impact our effective tax rate was 22.3% and 23.0%.rate. For the six months ended June 30, 2021, incomethe effective tax expense included arate differs from the 28.9% combined federal and state statutory rate due primarily to the net tax benefit resultingof $2.6 million from share-based awards, including the exercise of all previously issued outstanding stock appreciation rights of $2.1 million in the first quarter. Thequarter of 2021 in addition to the various permanent tax differences, tax credits and other discrete tax items that impact our effective tax rate is expected to be in the 25% to 27% range for the remaining quarters in 2021.rate.
We account for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and the tax basis of itsour assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies. Based on this analysis, management determined, it was more likely than not, that all of the deferred tax assets would be realized; therefore, 0no valuation allowance was provided against the net deferred tax assets of $41.6$54.5 million and $46.0$50.8 million at June 30, 20212022 and December 31, 2020, respectively.2021.
ASC 740-10-25 relates to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10-25 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We had unrecognized tax benefits of $984$955 thousand and $924$925 thousand at June 30, 20212022 and December 31, 2020,2021, respectively. We do not believe that the unrecognized tax benefits will change materially in the next twelve months. As of June 30, 2021,2022, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was $754$725 thousand.
At June 30, 20212022 and December 31, 2020,2021, we had 0no accrued interest or penalties. In the event we are assessed interest and/or penalties by federal or state tax authorities, such amounts will be classified in the consolidated financial statements as income tax expense.
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We are subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. We are no longer subject to examination by U.S. federal taxing authorities for years before 2017.2018. The statute of limitations for the assessment of California franchise taxes has expired for tax years before 20142017 (other state income and franchise tax statutes of limitations vary by state).

NOTE 9 – DERIVATIVE INSTRUMENTS
We use derivative instruments and other risk management techniques to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with our risk management policies.policies and to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans.
During the three and six months ended June 30, 2022, changes in fair value of interest rate swaps on loans and foreign exchange contracts were gains of $82 thousand and $185 thousand and were included in other income on the consolidated statements of operations. During the three and six months ended June 30, 2021, changes in fair value of interest rate swaps and caps on loans and foreign exchange contracts were a losslosses of $71 thousand and a gaingains of $200 thousand, compared to losses of $107 thousand and $288 thousand for the three and six months endedJune 30, 2020, and were included in other income on the consolidated statements of operations.
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thousand.
The following table presents the notional amount and fair value of derivative instruments included in the consolidated statements of financial condition as of the dates indicated.
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)Notional AmountFair
Value(1)
Notional AmountFair
Value(1)
($ in thousands)Notional Amount
Fair
Value(1)
Notional Amount
Fair
Value(1)
Derivative assets:Derivative assets:Derivative assets:
Interest rate swaps and caps on loans$64,215 $4,960 $67,840 $7,304 
Interest rate swaps on loansInterest rate swaps on loans$34,702 $1,074 $58,834 $3,390 
Foreign exchange contractsForeign exchange contracts3,920 224 7,010 328 Foreign exchange contracts5,511 186 4,725 175 
TotalTotal$68,135 $5,184 $74,850 $7,632 Total$40,213 $1,260 $63,559 $3,565 
Derivative liabilities:Derivative liabilities:Derivative liabilities:
Interest rate swaps and caps on loans$64,215 $5,242 $67,840 7,789 
Interest rate swaps on loansInterest rate swaps on loans$34,702 $1,082 $58,834 3,594 
Foreign exchange contractsForeign exchange contracts3,920 212 7,010 313 Foreign exchange contracts5,511 168 4,725 146 
TotalTotal$68,135 $5,454 $74,850 $8,102 Total$40,213 $1,250 $63,559 $3,740 
(1)The fair value of interest rate swaps and caps on loans and foreign exchange contracts are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated statements of financial condition.
We have entered into agreements with counterparty financial institutions, which include master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. We elect, however, to account for all derivatives with counterparty institutions on a gross basis.
NOTE 10 – EMPLOYEE STOCK COMPENSATION
On May 31, 2018, our stockholders approved the Company's 2018 Omnibus Stock Incentive Plan (“2018 Omnibus Plan”). The 2018 Omnibus Plan provides that the maximum number of shares available for awards is 4,417,882. As of June 30, 2021, 3,197,2692022, 2,169,018 shares were available for future awards.
Stock-based Compensation Expense
The following table presents total stock-based compensation expense and the related tax benefits for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
Stock options$$$$
Restricted stock awards and unitsRestricted stock awards and units1,338 1,468 2,882 3,042 Restricted stock awards and units$1,482 $1,338 $2,767 $2,882 
Total share-based compensation expense$1,338 $1,470 $2,882 $3,046 
Related tax benefitsRelated tax benefits$394 $433 $849 $897 Related tax benefits$428 $394 $799 $849 

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Total stock-based compensation expense represents the cost of time-based and performance-based stock units and awards. At June 30, 2021,2022, unrecognized compensation expense related to restricted stock awards and restricted stock units totaled $7.6$14.2 million and will be recognized over a weighted average remaining period of 2.33.0 years.

Restricted Stock Awards and Restricted Stock Units
We also have granted restricted stock awards and restricted stock units to certain employees, officers, and directors. The restricted stock awards and units are valued at the closing price of our stock on the measurement date. The restricted stock awards and units fully vest after a specified period (generally ranging from one to five years) of continued service from the date of grant plus, in some cases, the satisfaction of performance conditions. These performance targets include conditions relating to our profitability, stock price and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation Committee of our Board of Directors upon the Committee's certification of the satisfaction of the target level of performance. We recognize an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, generally upon vesting or, in the case of restricted stock units, when settled.
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The following table presents unvested restricted stock awards and restricted stock units activity for the three and six months ended June 30, 2021:2022:
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2021
Three Months Ended
June 30, 2022
Six Months Ended
June 30, 2022
Number of SharesWeighted Average Grant Date Fair Value Per ShareNumber of SharesWeighted
Average Grant
Date Fair Value
Per Share
Number of SharesWeighted Average Grant Date Fair Value Per ShareNumber of SharesWeighted
Average Grant
Date Fair Value
Per Share
Outstanding at beginning of periodOutstanding at beginning of period865,979 $16.12 848,302 $14.42 Outstanding at beginning of period784,791 $18.08 649,010 $17.17 
Granted (1)
Granted (1)
48,873 $17.15 269,330 $20.66 
Granted (1)
750,615 $11.52 1,021,182 $13.65 
Vested (2)
Vested (2)
(203,032)$12.87 (355,280)$13.70 
Vested (2)
(122,738)$15.66 (239,319)$16.34 
Forfeited (3)
Forfeited (3)
(14,732)$16.66 (65,264)$12.41 
Forfeited (3)
(9,608)$19.31 (27,813)$17.28 
Outstanding at end of periodOutstanding at end of period697,088 $17.13 697,088 $17.13 Outstanding at end of period1,403,060 $14.77 1,403,060 $14.77 
(1)There were 2,916695,567 and 66,472764,692 performance-based shares/units included in shares granted for the three and six months ended June 30, 2021.2022.
(2)There were 8,21824,783 and 77,32724,783 performance-based shares/units included in vested shares for the three and six months ended June 30, 2021.2022.
(3)The number of forfeited shares includesincluded aggregate performance-based shares/units of 0zero and 40,1609,428 for the three and six months ended June 30, 2021.2022.

Stock Options
We issuedThere were no stock options to certain employees, officers,granted during the three and directors. Stocksix months ended June 30, 2022. There were no unvested stock options are issued at the closing market price immediately before the grant dateas of June 30, 2022 and generally have a three to five year vesting period and contractual terms of seven to ten years. We recognize an income tax deduction upon exercise of a stock option to the extent taxable income is recognized by the option holder. In the case of a non-qualified stock option, the option holder recognizes taxable income based on the fair market value of the shares acquired at the time of exercise less the exercise price.
December 31, 2021. The following tabletables represents stock option activity for the three months ended June 30, 2021:2022:
Three Months Ended June 30, 2021Three Months Ended June 30, 2022
($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
($ in thousands, except per share data)($ in thousands, except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
Outstanding at beginning of periodOutstanding at beginning of period14,904 $13.05 Outstanding at beginning of period14,904 $13.05 
ExercisedExercised$Exercised— $— 
Outstanding at end of periodOutstanding at end of period14,904 $13.05 3.8 years$67 Outstanding at end of period14,904 $13.05 2.8 years$68 
Exercisable at end of periodExercisable at end of period14,904 $13.05 3.8 years$67 Exercisable at end of period14,904 $13.05 2.8 years$68 
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The following table represents stock option activity for the six months ended June 30, 2021:2022:
Six Months Ended June 30, 2021
($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
Outstanding at beginning of period55,069 $13.96 
Exercised(40,165)$14.30 
Outstanding at end of period14,904 $13.05 3.8 years$67 
Exercisable at end of period14,904 $13.05 3.8 years$67 

There were 0 unvested stock options as of June 30, 2021 and December 31, 2020.

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Six Months Ended June 30, 2022
($ in thousands, except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
Outstanding at beginning of period14,904 $13.05 
Exercised— $— 
Outstanding at end of period14,904 $13.05 2.8 years$68 
Exercisable at end of period14,904 $13.05 2.8 years$68 
Stock Appreciation Rights
On August 21, 2012, we granted to the then, and now former, chief executive officer, a ten-year stock appreciation right (“SAR”), which were fully exercised duringIn the first quarter of 2021, all of our then outstanding stock appreciation rights (“SARs”) were fully exercised resulting in the issuance of 305,772 shares of voting common stock. In connection with the exercise of the SARs, we recognized a tax benefit of $2.1 million (refer to Note 8 - Income Taxes). There are 0 further outstanding SARs. The following table represents SARs activity and during the weighted average exercise price per share as of and for the three and six months ended June 30, 2021:2021. There are no further outstanding SARs.
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2021
($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareNumber of SharesWeighted-Average Exercise Price Per Share
Outstanding at beginning of period$1,559,012 $11.60 
Exercised$(1,559,012)$11.60 
Outstanding at end of period0 $0 0 $0 
Exercisable at end of period0 $0 0 $0 

NOTE 11 – STOCKHOLDERS’ EQUITY
Preferred Stock
We are authorized to issue 50,000,000 shares of preferred stock with par value of $0.01 per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but generally have no voting rights. All of our outstanding shares of preferred stock havehad a $1,000 per share liquidation preference.
The following table presents our total outstanding preferred stock as of the dates indicated:
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)Shares OutstandingLiquidation PreferenceCarrying ValueShares OutstandingLiquidation PreferenceCarrying Value($ in thousands)Shares OutstandingLiquidation PreferenceCarrying ValueShares OutstandingLiquidation PreferenceCarrying Value
Series D
7.375% non-cumulative perpetual
$$93,270 $93,270 $89,922 
Series E
7.00%
non-cumulative perpetual
Series E
7.00%
non-cumulative perpetual
98,702 98,702 94,956 98,702 98,702 94,956 
Series E
7.00%
non-cumulative perpetual
— — — 98,702 98,702 94,956 
TotalTotal98,702 $98,702 $94,956 191,972 $191,972 $184,878 Total $ $ 98,702 $98,702 $94,956 


During certain periods, we have repurchased Series D Depositary Shares and Series E Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock and Series E Preferred Stock. When the consideration paid to repurchase shares exceeds the repurchased shares' carrying value, the difference reduces net income allocated to common shareholders. When the consideration paid to repurchase shares is less than the repurchased shares' carrying value, the difference increases net income allocated to common shareholders. The following table summarizes redemptions and repurchases of these depositary shares for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)2022202120222021
Series D Preferred Stock:
Depositary shares repurchased— — — 3,730,767 
Preferred Stock retired (shares)— — — 93,269 
Consideration paid$— $— $— $93,269 
Carrying value— — — 89,922 
Impact of preferred stock redemption$— $— $— $3,347 
Series E Preferred Stock:
Depositary shares repurchased— — 3,948,080 — 
Preferred Stock retired (shares)— — 98,702 — 
Consideration paid$— $— $98,703 $— 
Carrying value— — 94,956 — 
Impact of preferred stock redemption$— $— $3,747 $— 
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Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)2021202020212020
Series D Preferred Stock:
Depositary shares repurchased53,006 3,730,767 134,310 
Preferred Stock retired (shares)1,325 93,269 3,357 
Consideration paid$$1,238 $93,269 $2,696 
Carrying value— 1,278 89,922 3,237 
Impact of preferred stock redemption$$(40)$3,347 $(541)
Series E Preferred Stock:
Depositary shares repurchased57,065 64,465 
Preferred Stock retired (shares)1,427 1,612 
Consideration paid$$1,363 $$1,516 
Carrying value— 1,372 — 1,550 
Impact of preferred stock redemption$$(9)$$(34)

During the first quarter of 2022, we redeemed all of our outstanding Series E Depositary Shares, resulting in an after-tax charge of $3.7 million in the accompanying consolidated statements of operations. During the first quarter of 2021, we repurchasedredeemed all of our outstanding Series D Depositary Shares, resulting in an impact of preferred stock redemptionafter-tax charge of $3.3 million in the accompanying consolidated statements of operations.

Stock Repurchase Program
On March 15, 2022, we announced our Board of Directors authorized the repurchase of up to $75 million of our common stock. The repurchase authorization expires in March 2023. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions
During the three months ended June 30, 2022, common stock repurchased under the program totaled 2,113,176 shares at a weighted average price of $18.38. During the six months ended June 30, 2022, common stock repurchased under the program totaled 2,328,726 shares at a weighted average price of $18.52. As of June 30, 2022, the Company had $31.9 million remaining under the current stock repurchase authorization.
Change in Accumulated Other Comprehensive (Loss) Income ("AOCI")
Our AOCI includes unrealized gain (loss) on securities available-for-sale. Changes to AOCI are presented net of the tax effect as a component of stockholders' equity. Reclassifications from AOCI occur when a security is sold, called or matures and are recorded on the consolidated statements of operations either as a gain or loss. During the quarter ended March 31, 2022, we transferred certain AFS debt securities to HTM. The unrealized loss on such securities at the time of transfer continues to be reported in AOCI and is amortized over the remaining life of the security as a yield adjustment. The following table presents changes to AOCI for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
Unrealized gain (loss) on securities available-for-sale
Balance at beginning of periodBalance at beginning of period$5,185 $(54,148)$7,746 $(11,900)Balance at beginning of period$(19,172)$5,185 $7,743 $7,746 
Unrealized gain (loss) arising during the period13,550 56,701 9,912 (3,182)
Unrealized loss on securities available-for-sale:Unrealized loss on securities available-for-sale:
Unrealized loss arising during the periodUnrealized loss arising during the period(21,016)13,550 (59,103)9,912 
Reclassification adjustment from other comprehensive incomeReclassification adjustment from other comprehensive income(2,011)(2,011)Reclassification adjustment from other comprehensive income— — (16)— 
Total unrealized loss on securities available-for-saleTotal unrealized loss on securities available-for-sale(21,016)13,550 (59,119)9,912 
Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturityAmortization of unrealized loss of available-for-sale securities transferred to held-to-maturity246 — 333 — 
Tax effect of current period changesTax effect of current period changes(3,995)(16,107)(2,918)1,528 Tax effect of current period changes5,883 (3,995)16,984 (2,918)
Total changes, net of taxesTotal changes, net of taxes9,555 38,583 6,994 (3,665)Total changes, net of taxes(14,887)9,555 (41,802)6,994 
Balance at end of periodBalance at end of period$14,740 $(15,565)$14,740 $(15,565)Balance at end of period$(34,059)$14,740 $(34,059)$14,740 

NOTE 12 – VARIABLE INTEREST ENTITIES
We hold ownership interests in alternative energy partnerships and qualified affordable housing partnerships and have a variable interest in a multifamily securitization trust. We evaluate our interests in these entities to determine whether they meet the definition of a variable interest entity ("VIE") and whether we are required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE. We have determined that our interests in these entities meet the definition of variable interests.interests; however none of the VIE's meet the criteria for consolidation.
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Unconsolidated VIEs
Multifamily Securitization
During the third quarter of 2019, we transferred $573.5 million of multifamily loans, through a two-step process, to a third-party depositor which placed the multifamily loans into a third-party trust (a VIE) that issued structured pass-through certificates to investors. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860. We determined that we are not the primary beneficiary of this VIE as we do not have the power to direct the activities that will have the most significant economic impact on the entity.entity, therefore we do not consolidate the securitization trust. Our continuing involvement in this securitization is limited to customary obligations associated with the securitization of loans, including the obligation to cure, repurchase, or substitute loans in the event of a material breach in representations. Additionally, we have the obligation to guarantee credit losses up to 12% of the aggregate unpaid principal balances at cut-off date of the securitization. This obligation is supported by a $68.8 million letter of credit between the Freddie Mac and the FHLB.
The maximum loss exposure that would be absorbed by us in the event that all of the assets in the securitization trust are deemed worthless is $68.8 million, which represents the aforementioned obligation to guarantee credit losses up to 12%. We believe that the loss exposure on the multifamily securitization is reduced by both loan-to-value ratios of the underlying collateral balances and the overcollateralization that exists within the securitization trust. At June 30, 2021,2022, we have a $3.6$2.0 million repurchase reserve related to this VIE.
Alternative Energy Partnerships
We investinvested in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits). These entities were formed to invest in newly established residential and commercial solar leases and power purchase agreements. As a result of our investments, we have the right to certain investment tax credits and tax depreciation benefits (recognized on the flow through income statement method in accordance with ASC 740), and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers for a fixed period of time. While our interest in the alternative energy partnerships meets the definition of a VIE in accordance with ASC 810, we have determined that we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact the economic performance of the entities including operational and credit risk management activities. As we are not the primary beneficiary, we did not consolidate the entities.
We use the Hypothetical Liquidation at Book Value ("HLBV") method to account for our investments in energy tax projects as an equity investment under ASC 970-323-25-17. Under the HLBV method, an equity method investor determines its share of an investee's net earnings by comparing its claim on the investee's book value at the beginning and end of the period, assuming the investee were to liquidate all assets at their U.S. GAAP amounts and distribute the resulting cash to creditors and investors under their respective priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses from the equity investment for the period. To account for the tax credits earned on investments in alternative energy partnerships, we use the flow-through income statement method. Under this method, the tax credits are recognized as a reduction to income tax expense and the initial book-tax differences in the basis of the investments are recognized as additional tax expense in the year they are earned. Investments in alternative energy partnerships totaled $24.1$23.5 million and $28.0$25.9 million at June 30, 20212022 and December 31, 2020.2021.
The following table presents information regarding activity in our alternative energy partnerships for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
FundingsFundings$$$$3,631 Fundings$— $— $— $— 
Cash distribution from investmentCash distribution from investment570 547 1,108 1,001 Cash distribution from investment582 570 1,156 1,108 
Gain (loss) on investments in alternative energy partnerships829 167 (2,801)(1,738)
(Loss) gain on investments in alternative energy partnerships(Loss) gain on investments in alternative energy partnerships(1,043)829 (1,201)(2,801)
Income tax credits recognizedIncome tax credits recognizedIncome tax credits recognized— — — — 
Tax expense (benefit) recognized from HLBV applicationTax expense (benefit) recognized from HLBV application228 38 (770)(398)Tax expense (benefit) recognized from HLBV application(301)228 (347)(770)

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The following table represents the carrying value of the associated unconsolidated assets and liabilities and the associated maximum loss exposure for alternative energy partnerships as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2021
December 31,
2020
($ in thousands)June 30,
2022
December 31,
2021
CashCash$2,503 $3,228 Cash$2,367 $4,227 
Equipment, net of depreciationEquipment, net of depreciation236,952 241,015 Equipment, net of depreciation242,097 246,421 
Other assetsOther assets8,116 7,470 Other assets9,311 9,098 
Total unconsolidated assetsTotal unconsolidated assets$247,571 $251,713 Total unconsolidated assets$253,775 $259,746 
Total unconsolidated liabilitiesTotal unconsolidated liabilities$6,186 $6,357 Total unconsolidated liabilities$9,292 $12,129 
Maximum loss exposureMaximum loss exposure$24,068 $27,977 Maximum loss exposure$23,531 $25,888 

The maximum loss exposure that would be absorbed by us in the event that all of the assets in alternative energy partnerships are deemed worthless is $24.1$23.5 million, which is our recorded investment amount at June 30, 2021.2022.
We believe that the loss exposure on our investments is reduced considering our return on our investment is provided not only by the cash flows of the underlying client leases and power purchase agreements, but also through the significant tax benefits, including the federal tax credit carryover that resulted from the investments. In addition, our exposure is further limited as the arrangements include a transition manager to support any transition of the solar company sponsor, whose role includes that of the servicer and operation and maintenance provider, in the event the sponsor would be required to be removed from its responsibilities (e.g., bankruptcy, breach of contract, etc.).
Capital Trusts - Trust Preferred Securities
In connection with our merger with PMB, we acquired investments in 2 grantor trusts. These grantor trusts were originally formed to sell and issue trust preferred securities to institutional investors (Refer to Note 7 - Long-term Debt). We are not the primary beneficiary, and consequently, these grantor trusts are not consolidated in the consolidated financial statements. At June 30, 2022 and December 31, 2021, our investment in these grantor trusts, which is included in other assets in the consolidated statements of financial condition, totaled $527 thousand.
Qualified Affordable Housing Partnerships - Low Income Housing Tax Credits
We invest in limited partnerships that operate qualified affordable housing projects.projects that qualify for low income housing tax credits (“LIHTC”). The returns on these investments are generated primarily through allocated Federal tax credits and other tax benefits. In addition, theseLIHTC investments contribute to our compliance with the Community Reinvestment Act. These limited partnerships are considered to be VIEs, because either (i) they do not have sufficient equity investment at risk or (ii) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, we are not the primary beneficiary because the general partner has the ability to direct the activities of the VIEs that most significantly impact their economic performance. As a result, we do not consolidate these partnerships.
The following table presents information regarding balances in our qualified affordable housing partnershipsLIHTC investments for the periods indicated:
($ in thousands)($ in thousands)June 30,
2021
December 31,
2020
($ in thousands)June 30,
2022
December 31,
2021
Ending balance(1)
Ending balance(1)
$41,146 $43,209 
Ending balance(1)
$44,006 $38,982 
Aggregate funding commitmentAggregate funding commitment61,278 61,278��Aggregate funding commitment67,961 61,278 
Total amount fundedTotal amount funded45,155 42,991 Total amount funded53,038 51,014 
Unfunded commitmentUnfunded commitment16,123 18,287 Unfunded commitment14,923 10,264 
Maximum loss exposureMaximum loss exposure41,146 43,209 Maximum loss exposure44,006 38,982 
(1)Included in other assets in the accompanying Consolidated Statements of Financial Condition.
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The following table presents information regarding activity in our qualified affordable housing partnershipsLIHTC investments for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
FundingsFundings$1,161 $9,312 $2,164 $13,871 Fundings$919 $1,161 $2,024 $2,164 
Proportional amortization recognizedProportional amortization recognized881 1,148 2,063 2,295 Proportional amortization recognized1,027 881 2,573 2,063 
Income tax credits recognizedIncome tax credits recognized1,158 1,152 2,311 2,208 Income tax credits recognized1,163 1,158 2,536 2,311 

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NOTE 13 – EARNINGS (LOSS) PER COMMON SHARE
The following table presents computations of basic and diluted earnings (loss) per common share ("EPS") for the three and six months ended June 30, 2022:
Three Months Ended
June 30, 2022
Six Months Ended
June 30, 2022
($ in thousands except per share data)Common StockClass B
Common Stock
Common StockClass B Common Stock
Net income$26,504 $208 $74,645 $579 
Less: preferred stock dividends— — (1,409)(11)
Less: preferred stock redemption— — (3,718)(29)
Net income allocated to common stockholders$26,504 $208 $69,518 $539 
Weighted average common shares outstanding60,873,481 477,321 61,497,261 477,321 
Dilutive effects of restricted shares/units245,571 — 269,093 — 
Dilutive effects of stock options4,242 — 4,701 — 
Average shares and dilutive common shares61,123,294 477,321 61,771,055 477,321 
Basic earnings per common share$0.44 $0.44 $1.13 $1.13 
Diluted earnings per common share$0.43 $0.44 $1.13 $1.13 

For the three and six months ended June 30, 2022, there were 354,484 and 806 anti-dilutive restricted shares/units and no anti-dilutive stock options that were excluded from computing diluted earnings per common share.
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The following table presents computations of basic and diluted EPS for the three and six months ended June 30, 2021:
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2021
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2021
($ in thousands except per share data)($ in thousands except per share data)Common StockClass B
Common Stock
Common StockClass B Common Stock($ in thousands except per share data)Common StockClass B Common StockCommon StockClass B Common Stock
Net incomeNet income$18,870 $180 $33,109 $316 Net income$18,870 $180 $33,109 $316 
Less: Income allocated to participating securities(121)(1)
Less: income allocated to participating securitiesLess: income allocated to participating securities— — (121)(1)
Less: preferred stock dividendsLess: preferred stock dividends(1,711)(16)(4,822)(46)Less: preferred stock dividends(1,711)(16)(4,822)(46)
Less: preferred stock redemptionLess: preferred stock redemption(3,315)(32)Less: preferred stock redemption— — (3,315)(32)
Net income allocated to common stockholdersNet income allocated to common stockholders$17,159 $164 $24,851 $237 Net income allocated to common stockholders$17,159 $164 $24,851 $237 
Weighted average common shares outstandingWeighted average common shares outstanding50,172,865 477,321 50,024,048 477,321 Weighted average common shares outstanding50,172,865 477,321 50,024,048 477,321 
Dilutive effects of restricted shares/units238,008 302,848 
Dilutive effects of stock unitsDilutive effects of stock units238,008 — 302,848 — 
Dilutive effects of stock optionsDilutive effects of stock options4,008 6,068 Dilutive effects of stock options4,008 — 6,068 — 
Average shares and dilutive common sharesAverage shares and dilutive common shares50,414,881 477,321 50,332,964 477,321 Average shares and dilutive common shares50,414,881 477,321 50,332,964 477,321 
Basic earnings per common shareBasic earnings per common share$0.34 $0.34 $0.50 $0.50 Basic earnings per common share$0.34 $0.34 $0.50 $0.50 
Diluted earnings per common shareDiluted earnings per common share$0.34 $0.34 $0.49 $0.50 Diluted earnings per common share$0.34 $0.34 $0.49 $0.50 

For the three and six months ended June 30, 2021, there were 218,829 and 134,037 ofanti-dilutive restricted shares/units and 0no anti-dilutive stock options that were not considered inexcluded from computing diluted earnings per common share, because they were anti-dilutive.share.
During the first quarter of 2021, all of the Company's outstanding stock appreciation rights (SARs) were exercised resulting in the net issuance of 305,772 shares of voting common stock. Prior to this exercise, the SARs were considered participating securities and income was allocated to the respective holder and not part of income (loss) available to common stockholders. After the exercise of all of the Company's outstanding SARs, there are no longer any participating securities outstanding and the net shares issued in settlement of such SARs are included in the computation of average common shares for both basic and diluted earnings per share.
The following table presents computations of basic and diluted EPS for the three and six months ended June 30, 2020:
Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
($ in thousands except per share data)Common StockClass B Common StockCommon StockClass B Common Stock
Net loss$(18,273)$(176)$(24,804)$(238)
Less: participating securities dividends(93)(1)(186)(2)
Less: preferred stock dividends(3,409)(33)(6,909)(66)
Less: preferred stock redemption49 570 
Net loss allocated to common stockholders$(21,726)$(210)$(31,329)$(301)
Weighted average common shares outstanding49,553,598 477,321 49,770,527 477,321 
Dilutive effects of stock units
Dilutive effects of stock options
Average shares and dilutive common shares49,553,598 477,321 49,770,527 477,321 
Basic loss per common share$(0.44)$(0.44)$(0.63)$(0.63)
Diluted loss per common share$(0.44)$(0.44)$(0.63)$(0.63)

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For the three and six months ended June 30, 2020, there were 960,090 and 960,883 of restricted shares/units and 55,069 and 55,438 of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.

NOTE 14 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
Some financial instruments, such as unfunded loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met prior to their expiration dates. Commitments may expire without being used. Risk of credit loss exists up to the face amount of these instruments. The same credit policies are used to make such commitments as are used for originating loans, including obtaining collateral at exercise of the commitment.
The following table presents the contractual amount of financial instruments with off-balance-sheet risk as of the periods indicated:
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)Fixed RateVariable RateFixed RateVariable Rate($ in thousands)Fixed RateVariable RateFixed RateVariable Rate
Commitments to extend credit
Commitments to extend credit
$29,551 $59,078 $17,555 $38,141 
Commitments to extend credit
$48,805 $185,478 $37,107 $136,921 
Unused lines of creditUnused lines of credit551 1,527,667 1,783 1,348,138 Unused lines of credit4,454 1,995,891 6,894 1,699,933 
Letters of creditLetters of credit477 7,900 234 8,274 Letters of credit2,825 7,299 2,553 5,617 

Other Commitments
At June 30, 2021,2022, we had unfunded commitments of $16.1$14.9 million, $5.6$9.4 million, and $2.5$7.9 million for qualified affordable housing fund partnerships,LIHTC investments, Small Business Investment Company ("SBIC") investments, and other investments, respectively.

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NOTE 15 – REVENUE RECOGNITION
The following table presents noninterest income, segregated by revenue streams, in-scope and out-of-scope of Topic 606 - Revenue From Contracts With Customers, for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
Noninterest incomeNoninterest incomeNoninterest income
In scope of Topic 606In scope of Topic 606In scope of Topic 606
Deposit service feesDeposit service fees$825 $420 $1,635 $959 Deposit service fees$1,627 $825 $3,281 $1,635 
Debit card feesDebit card fees496 380 883 557 Debit card fees542 496 995 883 
OtherOther102 59 181 108 Other137 102 296 181 
Noninterest income (in-scope of Topic 606)Noninterest income (in-scope of Topic 606)1,423 859 2,699 1,624 Noninterest income (in-scope of Topic 606)2,306 1,423 4,572 2,699 
Noninterest income (out-of-scope of Topic 606)Noninterest income (out-of-scope of Topic 606)2,747 4,669 5,852 5,965 Noninterest income (out-of-scope of Topic 606)4,880 2,020 8,524 5,553 
Total noninterest incomeTotal noninterest income$4,170 $5,528 $8,551 $7,589 Total noninterest income$7,186 $3,443 $13,096 $8,252 

We do not typically enter into long-term revenue contracts with customersclients and as of June 30, 20212022 and December 31, 2020,2021, we did not have any significant contract balances.balances within the scope of Topic 606. As of June 30, 2021,2022, we did not capitalize any revenue contract acquisition costs.
Sale-leaseback Transaction: In January 2022, we completed a sale-leaseback transaction for 1 of our branch locations. We sold the branch for $2.4 million and recognized a gain of $771 thousand which is included in other income in the accompanying consolidated statements of operations.

NOTE 16 – RELATED-PARTY TRANSACTIONS
Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with the Bank in the ordinary course of business, including deposits, loans and other financial services related transactions. From time to time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, and do not involve more than
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the normal risk of collectability or present other unfavorable features. As of June 30, 2021,2022, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans.

Transactions with Related Parties
The Company and the Bank have engaged in transactions described below with the Company’s current or former directors, executive officers, and beneficial owners of more than 5five percent of the outstanding shares of the Company’s voting common stock and certain persons related to them.
As previously disclosed, the Company’s Board of Directors has authorized and directed the Company to provide indemnification, advancement and/or reimbursement for the costs of separate independent counsel retained by any then-current officer or director, in their individual capacity, with respect to matters related to (i) an investigation by the Special Committee of the Company’s Board of Directors in late 2016, (ii) a formal order of investigation issued by the SEC on January 4, 2017 (since resolved), and (iii) any civil or administrative proceedings against the Company as well as officers and directors currently or previously associated with the Company.Company (collectively, the “Indemnified Matters”).
DuringIndemnification costs were paid or reimbursed by the Company or its insurance carriers on behalf of certain current directors in connection with the Indemnified Matters, in an aggregate amount less than $120 thousand and $208 thousand for the three and six months ended June 30, 2021, indemnification2022. Indemnification costs were paid or reimbursed by the Company included $555 thousand and $564 thousand incurred by the Company’s former Interim Chief Financial Officer and Chief Strategy Officer, J. Francisco A. Turner. Indemnification costs were also paidor its insurance carriers on behalf of certain current and former directors and former executive officers in amounts each less than $120connection with the Indemnified Matters in aggregate amount of $156 thousand for the three and six months ended June 30, 2021.
Indemnification costs were paid on behalf of certain current and former directors and former executive officers in amounts each less than $120 thousand for the three and six months ended June 30, 2020.

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NOTE 17 – LITIGATION
From time to time, we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. In accordance with applicable accounting guidance, we establish an accrued liability when those matters present loss contingencies that are both probable and estimable. We continue to monitor the matters for further developments that could affect the amount of the accrued liability that has been previously established.

While the ultimate liability with respect to legal actions cannot be determined at this time, we believe that damages, if any, and other amounts relating to pending matters are not likely to be material to the consolidated financial statements.

NOTE 18 – SUBSEQUENT EVENTS
We have evaluated events from the date of the consolidated financial statements on June 30, 20212022 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.

Subsequent to June 30, 2022, we repurchased 485,282 shares of common stock at a weighted average price of $18.07, or $8.8 million. Since the announcement of the stock repurchase program on March 15, 2022, we have repurchased a total of 2,813,978 shares of common stock at a weighted average price of $18.45 per share, or $51.9 million.
There have been no other subsequent events that occurred during such period that would require disclosure in this report or would be required to be recognized in the consolidated financial statements as of June 30, 2022.
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management’s discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and six months ended June 30, 2021.2022. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 20202021 and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021.2022.

Executive Overview
We are focused on providing core banking products and services, including customized and innovative banking and lending solutions, designed to cater to the unique needs of California's diverse businesses, entrepreneurs and communities through our 30 31 full service branches in Orange, Los Angeles, San Diego, and Santa Barbara Counties. Through our over 600670 dedicated professionals, we are committed to servicing and building enduring relationships by providing a higher standard of banking. We offer a variety of financial products and services designed around our target clients in order to serve their banking and financial needs. We continue to grow average loans and earning assets, improve our deposit mix, reduce our cost of deposits, and maintain disciplined expense control. Strong loan production helped to offset runoff in certain legacy areas of our portfolio. Our loan pipeline is steadily building which is expected to support continued loan and earning asset growth through the year, assuming improving economic trends continue. During the first quarter,
On October 18, 2021, we also announced that we entered into a definitive agreement to acquireconsummated our merger with Pacific Mercantile Bancorp (PMBC)(PMB). Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our credit quality and serving businesses, entrepreneurs and individuals within our footprint.
Financial Highlights
For the three months ended June 30, 2021, March 31,second quarter of 2022, net income and net income available to common stockholders was $26.7 million, or $0.43 per diluted common share. This compares to net income of $48.5 million and net income available to common stockholders of $43.3 million, or $0.69 per diluted common share, for the first quarter of 2022 and net income of $19.1 million and net income available to common stockholders of $17.3 million, or $0.34 per diluted common share, for the second quarter of 2021. The first quarter of 2022 net income available to common stockholders included a $31.3 million pre-tax recovery from the settlement of a previously charged-off loan and a $3.7 million after-tax charge related to the redemption of Series E Preferred Stock. The operating results of PMB have been included since the date of acquisition in the fourth quarter of 2021 and June 30, 2020, net income (loss) was $19.1 million, $14.4 million and $(18.4) million. Diluted earnings (loss) from operations per common share were $0.34, $0.15 and $(0.44)consequently, may impact the comparison of the financial results for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020.periods presented.
Financial results for the second quarter of 20212022 included:
Adjusted EPS of $0.45
Return on average assets of 0.98%1.15%, compared to 2.09% in the prior quarter
Total loan productionPre-tax pre-provision return on average assets of $904.1 million, including loan fundings of $847.0 million
Period-end total cost of deposits of 0.20% and average cost of total deposits of 0.23%1.58%, a 5 basis point decreaseup from 1.54% in the prior quarter
Net interest margin of 3.27%3.58%, an 8increase of 7 basis point increasepoints from the prior quarter
Noninterest-bearing deposit balancesAverage noninterest-bearing deposits of 29%38%, flat with the prior quarter
Book value per common share of $15.70, up from $15.65 in the prior quarter
Tangible common equity per common share of $14.05, flat with the prior quarter
Average cost of total deposits at June 30, 2021, upof 0.17%, an increase of 9 basis points from 23% a year earlierthe prior quarter
Allowance for credit losses at 1.33%1.34% of total loans and 155%224% of non-performing loans, at June 30, 2021up from 1.32% and 181% in the prior quarter
Total deferrals/forbearances declined to $86.6Repurchased $38.9 million at June 30, 2021 from $108.7 million at March 31, 2021
Common Equity Tier 1 capital at 11.14%

Proposed Merger with Pacific Mercantile Bancorp:In March 2021, we entered into an agreement to merge (the “Merger Agreement”) with Pacific Mercantile Bancorp (“PMBC”), pursuant to which PMBC will merge (the “Merger”) with and into the Company, with the Company as the surviving corporation. Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of PMBC common stock excluding certain specified shares, will be converted into the right to receive 0.50 (the “Exchange Ratio”) of a share of the Company's common stock. In addition, at the effective time of the Merger, the Company will cash out all outstanding share-based awards based on formulas using the average price of the Company's common stock for a 20-day trading period prior to the closing of the Merger. Subject to regulatory approval, the transaction is expected to close during the third quarter of 2021.and $51.9 million cumulatively through July 20
COVID-19 Operational Update
The markets in which we operate are impacted by continuing uncertainty about the pace and strength of reopening and recovering from the COVID-19 pandemic. Despite the challenges created by the pandemic, we continue to execute on our strategic initiatives and the transformation of our balance sheet. We continue to operate 28All of our 30 branches ashave been reopened, including those branches in overlapping areas we temporarily closed some overlapping areas at the beginning of the pandemic to ensure an adequate balance between employee and client safety and business continuity to meet our clients' banking needs. The majorityWe have adopted a hybrid workplace environment, allowing many of our employees outside of our branches are working offsite with only essentialthe flexibility to continue to work remotely. We encourage our employees onsite. We are classified as an 'essential' businessto get vaccinated and we have implemented socialcontinue to monitor all federal, state, and physical safeguards for our customers and employees within all of our locations.

local laws to ensure we are in compliance with the latest health orders.
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CARES Act Response Efforts
On March 27, 2020, the U.S. federal government signed the CARES Act into law, which provided emergency assistance and health care response for individuals, families, and businesses affected by the COVID-19 pandemic. The CARES Act allocated nearly $660 billion for the PPP and was intended to assist small businesses negatively affected by the pandemic and economic downturn by providing funds for payroll and other qualifying expenses made through August 8, 2020. The loans are 100% guaranteed by the SBA and the full principal amount of the loans may qualify for loan forgiveness if certain conditions are met.

Paycheck Protection Program Flexibility Act of 2020
On October 7, 2020, the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”) extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period). The extension of the deferral period under the Flexibility Act automatically applied to all PPP loans.

Economic Aid Act
The Economic Aid Act became law December 27, 2020 extending the SBA authority to make PPP loans through May 31, 2021. The SBA issued an Interim Final Rule (IFR) January 6, 2021 and eligible applicants were able to obtain a first or second PPP loan. We elected to continue our participation in the PPP and resumed the origination of PPP loans effective January 11, 2021.

The PPP has provided an opportunity to differentiate ourselves by demonstrating how true client service can make a meaningful difference. We assisted numerous existing clients with our high touch business framework in addition to successfully attracting many new clients who are consistent with the type of commercial customers that we target in our traditional business development efforts.

As of June 30, 2021,2022, we have helped businesses through the approvalsfunding of $262$411 million in PPP funds during the first roundloans and $144 million during the second round. We continue to support our clients as we work with them through the forgiveness process. Prior to acquisition, PMB originated $390 million in PPP loans. At June 30, 2021,2022, outstanding PPP loans totaled $193.9$28.4 million, net of fees, of which $65.5$6.1 million relatesrelated to round one and $128.4$22.3 million relatesrelated to round two of the SBA program.

Borrower Payment Relief Efforts
We arehave been committed to supporting our existing borrowers and customers during this period of economic uncertainty. We actively engaged with our borrowers seeking payment relief and waived certain fees for impacted clients. One method we deployed was to offer forbearance and deferments to qualified clients.  For single familysingle-family residential mortgage loans, the forbearance period was initially 90 days in length and was patterned after the HUD guidelines where applicable. With respect to our non-SFR loan portfolio, the forbearance and deferment periods were also initially 90 days in length and were permitted to be extended.

Although many of our loans on assistance have reached the expiration of their deferral and forbearance periods, the Bank continues to work with our borrowers to provide reasonable solutions to assist each unique situation during this period of economic uncertainty. We are reviewing their current financial condition as we evaluate additional extension requests of deferral periods. For those commercial borrowers that demonstratedemonstrated a continuing need for a deferral, we generally expect to obtainobtained credit enhancements such as additional collateral, personal guarantees, and/or reserve requirements in order to grant an additional deferral period. We expect the legacy SFR loans to continue with a higher percentageAs of June 30, 2022, we no longer offer COVID-related deferments or forbearances, due to the applicable consumer regulations, however, the SFR portfolio is well secured with an average portfolio LTV below 70%.

and we do not have any deferments or forbearances outstanding.
For a discussion of the risk factors related to COVID-19, please refer to Part II, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020.

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The following table presents the composition of our loan portfolio for borrowers that received payment relief as of June 30, 2021 and December 31, 2020:
Deferment & Forbearances(1)(2)
June 30, 2021March 31, 2021
($ in thousands)Number of Loans
Amount(1)(2)
% of
Loan Category
Number of Loans
Amount(1)(2)
% of
Loan Category
Commercial:
Commercial and industrial$29,246 1.4 %$25,427 1.4 %
Commercial real estate1,141 0.1 %3,765 0.4 %
Multifamily— — — %17,000 1.4 %
SBA3,315 1.3 %13,238 3.9 %
Total commercial33,702 0.7 %13 59,430 1.3 %
Consumer:
Single family residential mortgage46 52,384 4.1 %47 48,831 3.9 %
Other consumer472 1.9 %428 1.6 %
Total consumer48 52,856 4.0 %49 49,259 3.8 %
Total56 $86,558 1.4 %62 $108,689 1.9 %
(1)Excludes loans in forbearance that are current
(2)Excludes loans delinquent prior to COVID-19

Loans on deferment or forbearance status decreased $22.1 million during the second quarter of 2021. The Bank is in contact with borrowers to provide additional assistance as needed and we continue to actively monitor and manage all lending relationships in a manner that we believe supports our clients and protects the Bank.

Other Efforts
To support our community, we continue to meet the immediate needs of our most vulnerable neighbors. We meet these needs by providing donations, grants and sponsorships that support affordable housing, workforce and economic development and community services. Our volunteers have continued to provide financial literacy classes in a virtual environment as well as developing a virtual tour of the Bank’s headquarters that introduces students to a variety of different career paths and business unit leaders.

CRITICAL ACCOUNTING POLICIESESTIMATES
Our consolidated financial statements are preparedWe follow accounting and reporting policies and procedures that conform, in accordance withall material respects, to GAAP and generalto practices withingenerally applicable to the banking industry. As certain accounting policies requirefinancial services industry, the most significant estimates and assumptions that have a material impact on the carrying value of assets and liabilities, we have established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. Our critical accounting policieswhich are described in Note 1 Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements andincluded in the “Critical Accounting Policies” sectionItem 8 of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company'sour Annual Report on Form 10-K for the year ended December 31, 2020 and in Note 12021 filed with the SEC. The preparation of Consolidated Financial Statements (unaudited)in conformity with GAAP requires management to make judgments and accounting estimates that affect the amounts reported for assets, liabilities, revenues and expenses on the Consolidated Financial Statements and accompanying notes, and amounts disclosed as contingent assets and liabilities. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.
Accounting estimates are necessary in the application of certain accounting policies and procedures that are particularly susceptible to significant change. Critical accounting policies are defined as those that require the most complex or subjective judgment and are reflective of significant uncertainties, and could potentially result in materially different results under different assumptions and conditions. Management has identified our most critical accounting policies and accounting estimates as: investment securities, allowance for credit losses, business combinations, valuation of acquired loans, goodwill and deferred income taxes. See Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Unuadited) included in Part IItem 1 for a description of these policies.
Investment Securities. Held-to-maturity debt securities are carried at amortized cost and available-for-sale debt securities are carried at fair value. These securities are analyzed for credit deterioration under ASC 326, which requires the Company to determine whether impairment exists as of the reporting date and whether that impairment is due to credit deterioration. An allowance for credit losses would be established for losses on held-to-maturity and available-for-sale debt securities due to credit losses and would be reported as a component of provision for credit losses.
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The valuation of investment securities considers observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and respective terms and conditions for debt instruments. We employ procedures to monitor the pricing service's assumptions and establish processes to challenge the pricing service's valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. All securities available-for-sale were classified as Level 2 at June 30, 2022 and December 31, 2021. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management's judgment and evaluation for valuation. We had no securities available-for-sale classified as Level 3 at June 30, 2022 and December 31, 2021.
The estimates used to determine the fair values of investment securities can be complex and require judgment. These critical estimates are difficult to predict and may result in credit losses in future periods if actual results materially differ from the estimated assumptions utilized in our valuation of these assets.
Allowance for Credit Losses (“ACL”).The ACL is estimated on a quarterly basis and represents management’s estimate of current expected credit losses (“CECL”) in our loan portfolio. The ACL estimate is based on the accounting standard commonly known as CECL. Under the CECL method, pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. Collective loss estimates are determined by applying loss factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining life of the collectively evaluated portfolio. The allowance for loan losses includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including those described in the federal banking agencies' joint interagency policy statement on ALL. These factors include, among others, inherent imprecision in forecasting economic variables, including determining the depth and duration of economic cycles and their impact to relevant economic variables; qualitative adjustments based on our evaluation of different forecast scenarios and known recent events impacting relevant economic variables; data factors that address the risk that certain model inputs may not reflect all available information including (i) risk factors that have not been fully addressed in internal risk ratings, (ii) changes in lending policies and procedures, (iii) changes in the level and quality of experience held by lending management, (iv) imprecision in the risk rating system and (v) limitations in data available for certain loan portfolios. The ACL process also includes challenging and calibrating the model and model results against observed information, trends and events within the loan portfolio, among others. The ACL and provision for credit losses include amounts and changes from both the allowance for loan losses and the reserve for unfunded commitments.
Business Combinations.Business combinations are accounted for using the acquisition method of accounting under ASC Topic 805 - Business Combinations. Under the acquisition method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
The estimates used to determine the fair values of assets and liabilities acquired in a business combination can be complex and require judgment. For example, we generally value core deposit intangible assets using a discounted cash flow approach, which require a number of critical estimates that include, but are not limited to, future expected cash flows from depositor relationships, expected "decay" rates, and the determination of discount rates. These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our initial valuation of net assets and liabilities acquired.
Goodwill. Goodwill represents the excess purchase price of businesses acquired over the fair value of the identifiable net assets acquired. Goodwill is not subject to amortization and is evaluated for impairment at least annually, normally during the fourth fiscal quarter, or more frequently in the interim if events occur or circumstances change indicating impairment may have occurred. The determination of whether impairment has occurred is based on an assessment of several factors, including, but not limited to, operating results, business plans, economic projections, anticipated future cash flows, and current market data. Any impairment identified as part of this Quarterly Reporttesting is recognized through a charge to noninterest expense.
The assessment of impairment discussed above incorporate inherent uncertainties, including projected operating results and future market conditions, which are often difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts.
Acquired Loans.At acquisition date, loans are evaluated to determine whether they meet the criteria of a purchased credit-deteriorated (“PCD”) loan. PCD loans are loans that in management's judgement have experienced more than insignificant deterioration in credit quality since origination. Factors that indicate a loan may have experienced more than insignificant credit deterioration include delinquency, downgrades in credit rating, non-accrual status, and other negative factors identified by
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management at the time of initial assessment. PCD loans are initially recorded at fair value, with the resulting non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the date of acquisition, an ACL is established with a corresponding increase to the overall acquired loan balance. This initial ACL is determined using the Company's current expected credit losses methodology.
Acquired loans that are not considered PCD loans (“non-PCD loans”) are also recognized at fair value at the acquisition date, with the resulting credit and non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the time of acquisition, the Company establishes an initial ACL for acquired non-PCD loans through a charge to the provision for credit losses. This initial ACL is determined using the Company's current expected credit losses methodology.
Subsequent to acquisition date, the ACL for both PCD and non-PCD loans is determined using the same methodology to determine current expected credit losses that is applied to all other loans.
The estimates used to determine the fair values of non-PCD and PCD acquired loans can be complex and require significant judgment regarding items such as default rates, timing and amount of future cash flows, prepayment rates and other factors. These critical estimates are difficult to predict and may result in provisions for credit losses in future periods if actual losses materially differ from the estimated assumptions utilized in our initial valuation of acquired loans.
Deferred Taxes.Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on Form 10-Q.enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are also recognized for operating loss and tax credit carryforwards. Accounting guidance requires that companies assess whether a valuation allowance should be established against the deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies.

Although we believe our assessments of th
e realizability of deferred income taxes are reasonable, no assurance can be given that their realizability will not be different from that which is reflected in our net deferred tax asset balance.
Tax positions that are uncertain but meet a more-likely-than-not recognition threshold are initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position meets the more likely than not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management's judgment.
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.
Recent Accounting Pronouncements Not Yet Adopted
Our recent accounting pronouncements not yet adopted are described in Note 1 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 20202021 and in Note 1 Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.


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Non-GAAP Financial Measures
Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.
Tangible assets, tangible equity, tangible common equity, tangible equity to tangible assets, tangible common equity to tangible assets, tangible common equity per common share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income, (loss), adjusted PTPP income, (loss), PTPP income (loss) ROAA, adjusted PTPP income (loss) ROAA, efficiency ratio, adjusted efficiency ratio, adjusted total revenue, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS) and adjusted return on average assets (ROAA) constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.
Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock from tangible equity. Return on average tangible common equity is computed by dividing net income (loss) available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.
PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding net interest income and adjusted noninterest income (adjusted total revenue)revenue and subtracting adjusted noninterest expense. PTPP income ROAA is computed by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is computed by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is computed by dividing noninterest expense by total revenue. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by adjusted total revenue.
Adjusted net income (loss) is calculated by adjusting net income (loss) for tax-effected noninterest income and expense adjustments and the tax impact from the exercise of stock appreciation rights.rights for the periods indicated. Adjusted ROAA is computed by dividing annualized adjusted net income by average assets. Adjusted net income (loss) available to common shareholdersstockholders is computed by removing the impact of preferred stock redemptions from adjusted net income. Adjusted diluted earnings per share is computed by dividing adjusted net income (loss).available to common stockholders by the weighted average diluted common shares outstanding.
Management believes the presentation of these non-GAAP financial measures providesprovide useful supplemental information that is essential to a proper understanding of the financial results and operating performance of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.
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(Dollars in thousands, except per share data)
(Unaudited)
(Dollars in thousands, except per share data)
(Unaudited)
June 30,
2021
December 31,
2020
(Dollars in thousands, except per share data)
(Unaudited)
June 30,
2022
December 31,
2021
Tangible common equity, and tangible common equity to tangible assets ratioTangible common equity, and tangible common equity to tangible assets ratioTangible common equity, and tangible common equity to tangible assets ratio
Total assetsTotal assets$8,027,413 $7,877,334 Total assets$9,502,113 $9,393,743 
Less goodwillLess goodwill(37,144)(37,144)Less goodwill(95,127)(94,301)
Less other intangible assetsLess other intangible assets(2,069)(2,633)Less other intangible assets(4,677)(6,411)
Tangible assets(1)
Tangible assets(1)
$7,988,200 $7,837,557 
Tangible assets(1)
$9,402,309 $9,293,031 
Total stockholders' equityTotal stockholders' equity$949,130 $1,065,290 
Less preferred stockLess preferred stock— (94,956)
Total common stockholders' equityTotal common stockholders' equity$949,130 $970,334 
Total stockholders' equityTotal stockholders' equity$829,362 $897,207 Total stockholders' equity$949,130 $1,065,290 
Less goodwillLess goodwill(37,144)(37,144)Less goodwill(95,127)(94,301)
Less other intangible assetsLess other intangible assets(2,069)(2,633)Less other intangible assets(4,677)(6,411)
Tangible equity(1)
Tangible equity(1)
790,149 857,430 
Tangible equity(1)
849,326 964,578 
Less preferred stockLess preferred stock(94,956)(184,878)Less preferred stock— (94,956)
Tangible common equity(1)
Tangible common equity(1)
$695,193 $672,552 
Tangible common equity(1)
$849,326 $869,622 
Total stockholders' equity to total assetsTotal stockholders' equity to total assets10.33 %11.39 %Total stockholders' equity to total assets9.99 %11.34 %
Tangible equity to tangible assets(1)
Tangible equity to tangible assets(1)
9.89 %10.94 %
Tangible equity to tangible assets(1)
9.03 %10.38 %
Tangible common equity to tangible assets(1)
Tangible common equity to tangible assets(1)
8.70 %8.58 %
Tangible common equity to tangible assets(1)
9.03 %9.36 %
Common shares outstandingCommon shares outstanding50,313,228 49,767,489 Common shares outstanding59,985,736 62,188,206 
Class B non-voting non-convertible common shares outstandingClass B non-voting non-convertible common shares outstanding477,321 477,321 Class B non-voting non-convertible common shares outstanding477,321 477,321 
Total common shares outstandingTotal common shares outstanding50,790,549 50,244,810 Total common shares outstanding60,463,057 62,665,527 
Book value per common shareBook value per common share$15.70 $15.48 
Tangible common equity per common share(1)
Tangible common equity per common share(1)
$13.69 $13.39 
Tangible common equity per common share(1)
$14.05 $13.88 
Book value per common share$14.46 $14.18 
(1)Non-GAAP measure.
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Three Months EndedSix Months Ended June 30,Three Months EndedSix Months Ended June 30,
(Dollars in thousands)
(Unaudited)
(Dollars in thousands)
(Unaudited)
June 30,
2021
March 31,
2021
June 30,
2020
June 30,
2021
June 30,
2020
(Dollars in thousands)
(Unaudited)
June 30,
2022
March 31,
2022
June 30,
2021
20222021
Return on tangible common equityReturn on tangible common equityReturn on tangible common equity
Average total stockholders' equityAverage total stockholders' equity$814,973 $888,174 $854,250 $851,371 $885,149 Average total stockholders' equity$969,885 $1,049,912 $814,973 $1,009,677 $851,371 
Less average preferred stockLess average preferred stock(94,956)(164,895)(185,471)(129,733)(187,539)Less average preferred stock— (75,965)(94,956)(37,773)(129,733)
Average total common stockholders' equityAverage total common stockholders' equity969,885 973,947 720,017 971,904 721,638 
Less average goodwillLess average goodwill(37,144)(37,144)(37,144)(37,144)(37,144)Less average goodwill(95,127)(94,307)(37,144)(94,719)(37,144)
Less average other intangible assetsLess average other intangible assets(2,224)(2,517)(3,574)(2,370)(3,789)Less average other intangible assets(4,869)(6,224)(2,224)(5,543)(2,370)
Average tangible common equity(1)
Average tangible common equity(1)
$680,649 $683,618 $628,061 $682,124 $656,677 
Average tangible common equity(1)
$869,889 $873,416 $680,649 $871,642 $682,124 
Net income (loss) available to common stockholders$17,323 $7,825 $(21,936)$25,088 $(31,630)
Net income available to common stockholdersNet income available to common stockholders$26,712 $43,345 $17,323 $70,057 $25,088 
Add amortization of intangible assetsAdd amortization of intangible assets282 282 430 564 859 Add amortization of intangible assets313 441 282 754 564 
Less tax effect on amortization of intangible assets(59)(59)(90)(118)(180)
Net income (loss) available to common stockholders(1)
$17,546 $8,048 $(21,596)$25,534 $(30,951)
Less tax effect on amortization of intangible assets(2)
Less tax effect on amortization of intangible assets(2)
(66)(93)(59)(158)(118)
Net income available to common stockholders(1)
Net income available to common stockholders(1)
$26,959 $43,693 $17,546 $70,653 $25,534 
Return on average equityReturn on average equity9.38 %6.56 %(8.69)%7.92 %(5.69)%Return on average equity11.05 %18.74 %9.38 %15.02 %7.92 %
Return on average tangible common equity(1)
Return on average tangible common equity(1)
10.34 %4.77 %(13.83)%7.55 %(9.48)%
Return on average tangible common equity(1)
12.43 %20.29 %10.34 %16.35 %7.55 %
Statutory Federal tax rate utilized for calculating tax effect on amortization of intangible assets21.00 %21.00 %21.00 %21.00 %21.00 %
(1)Non-GAAP measure.
(2)Adjustments shown net of a statutory Federal tax rate of 21%.

Three Months EndedSix Months Ended June 30,
(Dollars in thousands)
(Unaudited)
June 30,
2021
March 31,
2021
June 30,
2020
20212020
Adjusted noninterest income and expense
Total noninterest income$4,170 $4,381 $5,528 $8,551 $7,589 
Noninterest income adjustments:
Net (gain) loss on securities available for sale— — (2,011)— (2,011)
Fair value adjustment on legacy SFR loans held for sale(20)— (25)(20)1,561 
Total noninterest income adjustments(20)— (2,036)(20)(450)
Adjusted noninterest income(1)
$4,150 $4,381 $3,492 $8,531 $7,139 
Total noninterest expense$40,559 $46,735 $72,770 $87,294 $119,689 
Noninterest expense adjustments:
Naming rights termination— — (26,769)— (26,769)
Extinguishment of debt— — (2,515)— (2,515)
Professional (fees) recoveries1,284 (721)(875)563 (2,553)
Merger-related costs(700)(700)— (1,400)— 
Adjustments to noninterest expense before gain (loss) in alternative energy partnership investments584 (1,421)(30,159)(837)(31,837)
Gain (loss) in alternative energy partnership investments829 (3,630)167 (2,801)(1,738)
Total noninterest expense adjustments1,413 (5,051)(29,992)(3,638)(33,575)
Adjusted noninterest expense(1)
$41,972 $41,684 $42,778 $83,656 $86,114 
Average assets$7,827,006 $7,860,952 $7,740,206 $7,843,885 $7,651,575 
Noninterest expense to average total assets2.08 %2.41 %3.78 %2.24 %3.15 %
Adjusted noninterest expense to average total assets(1)
2.15 %2.15 %2.22 %2.15 %2.26 %
Three Months EndedSix Months Ended June 30,
(Dollars in thousands)
(Unaudited)
June 30,
2022
March 31,
2022
June 30,
2021
20222021
Adjusted noninterest expense
Total noninterest expense$48,612 $46,596 $39,832 $95,208 $86,995 
Noninterest expense adjustments:
Professional recoveries (fees)(455)106 1,284 (349)563 
Merger-related costs— — (700)— (1,400)
Noninterest expense adjustments before (loss) gain in alternative energy partnership investments(455)106 584 (349)(837)
(Loss) gain in alternative energy partnership investments(1,043)(158)829 (1,201)(2,801)
Total noninterest expense adjustments(1,498)(52)1,413 (1,550)(3,638)
Adjusted noninterest expense(1)
$47,114 $46,544 $41,245 $93,658 $83,357 
Average assets$9,342,696 $9,392,305 $7,827,006 $9,367,364 $7,843,885 
Noninterest expense to average total assets2.09 %2.01 %2.04 %2.05 %2.24 %
Adjusted noninterest expense to average total assets(1)
2.02 %2.01 %2.11 %2.02 %2.14 %
(1)Non-GAAP measure.

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Three Months EndedSix Months Ended June 30,Three Months EndedSix Months Ended June 30,
(Dollars in thousands)
(Unaudited)
(Dollars in thousands)
(Unaudited)
June 30,
2021
March 31,
2021
June 30,
2020
June 30,
2021
June 30,
2020
(Dollars in thousands)
(Unaudited)
June 30,
2022
March 31,
2022
June 30,
2021
20222021
Adjusted pre-tax pre-provision incomeAdjusted pre-tax pre-provision incomeAdjusted pre-tax pre-provision income
Net interest incomeNet interest income$59,847 $57,916 $55,315 $117,763 $107,176 Net interest income$78,299 $76,441 $59,847 $154,740 $117,763 
Noninterest incomeNoninterest income4,170 4,381 5,528 8,551 7,589 Noninterest income7,186 5,910 3,443 13,096 8,252 
Total revenueTotal revenue64,017 62,297 60,843 126,314 114,765 Total revenue85,485 82,351 63,290 167,836 126,015 
Noninterest expenseNoninterest expense40,559 46,735 72,770 87,294 119,689 Noninterest expense48,612 46,596 39,832 95,208 86,995 
Pre-tax pre-provision income (loss)(1)
$23,458 $15,562 $(11,927)$39,020 $(4,924)
Pre-tax pre-provision income(1)
Pre-tax pre-provision income(1)
$36,873 $35,755 $23,458 $72,628 $39,020 
Total revenueTotal revenue$64,017 $62,297 $60,843 $126,314 $114,765 Total revenue$85,485 $82,351 $63,290 $167,836 $126,015 
Total noninterest income adjustments(20)— (2,036)(20)(450)
Adjusted total revenue(1)
63,997 62,297 58,807 126,294 114,315 
Noninterest expenseNoninterest expense40,559 46,735 72,770 87,294 119,689 Noninterest expense48,612 46,596 39,832 95,208 86,995 
Total noninterest expense adjustmentsTotal noninterest expense adjustments1,413 (5,051)(29,992)(3,638)(33,575)Total noninterest expense adjustments(1,498)(52)1,413 (1,550)(3,638)
Adjusted noninterest expense(1)
Adjusted noninterest expense(1)
41,972 41,684 42,778 83,656 86,114 
Adjusted noninterest expense(1)
47,114 46,544 41,245 93,658 83,357 
Adjusted pre-tax pre-provision income(1)
Adjusted pre-tax pre-provision income(1)
$22,025 $20,613 $16,029 $42,638 $28,201 
Adjusted pre-tax pre-provision income(1)
$38,371 $35,807 $22,045 $74,178 $42,658 
Average assetsAverage assets$7,827,006 $7,860,952 $7,740,206 $7,843,885 $7,651,575 Average assets$9,342,696 $9,392,305 $7,827,006 $9,367,364 $7,843,885 
Pre-tax pre-provision income (loss) ROAA(1)
1.20 %0.80 %(0.62)%1.00 %(0.13)%
Pre-tax pre-provision income ROAA(1)
Pre-tax pre-provision income ROAA(1)
1.58 %1.54 %1.20 %1.56 %1.00 %
Adjusted pre-tax pre-provision income ROAA(1)
Adjusted pre-tax pre-provision income ROAA(1)
1.13 %1.06 %0.83 %1.10 %0.74 %
Adjusted pre-tax pre-provision income ROAA(1)
1.65 %1.55 %1.13 %1.60 %1.10 %
Efficiency ratio(1)
Efficiency ratio(1)
63.36 %75.02 %119.60 %69.11 %104.29 %
Efficiency ratio(1)
56.87 %56.58 %62.94 %56.73 %69.04 %
Adjusted efficiency ratio(1)
Adjusted efficiency ratio(1)
65.58 %66.91 %72.74 %66.24 %75.33 %
Adjusted efficiency ratio(1)
55.11 %56.52 %65.17 %55.80 %66.15 %
(1)Non-GAAP measure.
Three Months EndedSix Months Ended June 30,
June 30,
2022
March 31,
2022
June 30,
2021
20222021
Adjusted net income
Net income(1)
$26,712 $48,512 $19,050 $75,224 $33,425 
Adjustments:
Noninterest expense adjustments1,498 52 (1,413)1,550 3,638 
Tax impact of adjustments above(2)
(443)(15)418 (458)(1,076)
Tax impact from exercise of stock appreciation rights— — — — (2,093)
Adjustments to net income1,055 37 (995)1,092 469 
Adjusted net income(3)
$27,767 $48,549 $18,055 $76,316 $33,894 
Average assets$9,342,696 $9,392,305 $7,827,006 $9,367,364 $7,843,885 
ROAA1.15 %2.09 %0.98 %1.62 %0.86 %
Adjusted ROAA(3)
1.19 %2.10 %0.93 %1.64 %0.87 %
Adjusted net income available to common stockholders
Net income available to common stockholders$26,712 $43,345 $17,323 $70,057 $25,088 
Adjustments to net income1,055 37 (995)1,092 469 
Adjustments for impact of preferred stock redemption— 3,747 — 3,747 3,347 
Adjusted net income available to common stockholders(3)
$27,767 $47,129 $16,328 $74,896 $28,904 
Average diluted common shares61,600,615 62,906,003 50,892,202 62,248,376 50,810,285 
Diluted EPS$0.43 $0.69 $0.34 $1.13 $0.49 
Adjusted diluted EPS(3)(4)
$0.45 $0.75 $0.32 $1.20 $0.57 

(1)
Net income for the three months ended March 31, 2022 and six months ended June 30, 2022 includes a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of a previously charged-off loan; there is no similar recovery in any of the other periods presented. The Bank previously recognized a $35.1 million charge-off for this loan during the third quarter of 2019.

(2)
Tax impact of adjustments shown at an effective tax rate of 29.6%.
(3)Non-GAAP measure.
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Three Months EndedSix Months Ended June 30,
(Dollars in thousands, except per share data)
(Unaudited)
June 30,
2021
March 31,
2021
June 30,
2020
20212020
Adjusted net income (loss)
Net income (loss)$19,050 $14,375 $(18,449)$33,425 $(25,042)
Adjustments, net:(1)
Noninterest income15 — 1,527 15 338 
Noninterest expense(1,060)3,788 22,494 2,729 25,181 
Adjusted net income (loss) before tax impact from exercise of stock appreciation rights18,005 18,163 5,572 36,169 477 
Tax impact from exercise of stock appreciation rights— 2,093 — 2,093 — 
Adjusted net income (loss)(2)
$18,005 $16,070 $5,572 $34,076 $477 
Average assets$7,827,006 $7,860,952 $7,740,206 $7,843,885 $7,651,575 
ROAA0.98 %0.74 %(0.96)%0.86 %(0.66)%
Adjusted ROAA(2)
0.92 %0.83 %0.29 %0.88 %0.01 %
Adjusted net income (loss) available to common stockholders
Net income (loss) available to common stockholders$17,323 $7,825 $(21,936)$25,088 $(31,630)
Adjustments to net income (loss)(3)
(1,045)1,695 24,021 651 25,519 
Adjustments for impact of preferred stock redemption— 3,347 (49)3,347 (575)
Adjusted net income (loss) available to common stockholders(2)
$16,278 $12,867 $2,036 $29,086 $(6,686)
Average diluted common shares50,892,202 50,750,522 50,030,919 50,810,285 50,247,848 
Diluted EPS$0.34 $0.15 $(0.44)$0.49 $(0.63)
Adjusted diluted EPS(2)
$0.32 $0.25 $0.04 $0.57 $(0.13)
(1)Adjustments shown net of an effective tax rate of 25%
(2)Non-GAAP measure.
(3)(4)Represents the difference between net income and adjusted net income available to common stockholders divided by average diluted common shares.


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RESULTS OF OPERATIONS
Net Interest Income
The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates for the three months ended June 30, 2021,2022, March 31, 20212022 and June 30, 2020:2021:
Three Months EndedThree Months Ended
June 30, 2021March 31, 2021June 30, 2020June 30, 2022March 31, 2022June 30, 2021
($ in thousands)($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/
Cost
Average BalanceInterest and DividendsYield/Cost($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/
Cost
Average BalanceInterest and DividendsYield/Cost
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Total loans(1)(2)
Total loans(1)(2)
$5,771,415 $61,900 4.30 %$5,784,041 $61,345 4.30 %$5,707,619 $63,642 4.48 %
Total loans(1)(2)
$7,269,655 $78,895 4.35 %$7,262,774 $76,234 4.26 %$5,771,415 $61,900 4.30 %
SecuritiesSecurities1,308,230 6,986 2.14 %1,236,138 6,501 2.13 %1,063,941 7,816 2.95 %Securities1,216,612 8,124 2.68 %1,292,079 7,309 2.29 %1,308,230 6,986 2.14 %
Other interest-earning assets (2)(3)
Other interest-earning assets (2)(3)
258,915 791 1.23 %336,443 772 0.93 %424,776 1,239 1.17 %
Other interest-earning assets (2)(3)
295,715 1,399 1.90 %265,339 726 1.11 %258,915 791 1.23 %
Total interest-earning assetsTotal interest-earning assets7,338,560 69,677 3.81 %7,356,622 68,618 3.78 %7,196,336 72,697 4.06 %Total interest-earning assets8,781,982 88,418 4.04 %8,820,192 84,269 3.87 %7,338,560 69,677 3.81 %
ACL(79,103)(81,111)(78,528)
Allowance for loan lossesAllowance for loan losses(94,217)(92,618)(79,103)
BOLI and noninterest-earning assets (3)(4)
BOLI and noninterest-earning assets (3)(4)
567,549 585,441 622,398 
BOLI and noninterest-earning assets (3)(4)
654,931 664,731 567,549 
Total assetsTotal assets$7,827,006 $7,860,952 $7,740,206 Total assets$9,342,696 $9,392,305 $7,827,006 
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Interest-bearing checkingInterest-bearing checking$2,182,419 679 0.12 %$2,140,314 901 0.17 %$1,710,038 2,186 0.51 %Interest-bearing checking$2,363,233 1,457 0.25 %$2,409,262 641 0.11 %$2,182,419 679 0.12 %
Savings903,940 1,974 0.88 %928,446 2,013 0.88 %905,997 2,718 1.21 %
Money market734,165 270 0.15 %726,079 377 0.21 %592,872 850 0.58 %
Savings and money marketSavings and money market1,598,663 860 0.22 %1,673,244 510 0.12 %1,638,105 2,244 0.55 %
Certificates of depositCertificates of deposit633,101 620 0.39 %720,180 995 0.56 %1,214,939 4,451 1.47 %Certificates of deposit631,415 863 0.55 %508,244 237 0.19 %633,101 620 0.39 %
Total interest-bearing depositsTotal interest-bearing deposits4,453,625 3,543 0.32 %4,515,019 4,286 0.38 %4,423,846 10,205 0.93 %Total interest-bearing deposits4,593,311 3,180 0.28 %4,590,750 1,388 0.12 %4,453,625 3,543 0.32 %
FHLB advancesFHLB advances418,111 2,944 2.82 %446,618 3,112 2.83 %819,166 4,818 2.37 %FHLB advances485,629 3,114 2.57 %459,749 2,953 2.60 %418,111 2,944 2.82 %
Securities sold under repurchase agreements— — — %— — — %1,024 0.79 %
Long-term debt and other interest-bearing liabilities274,412 3,343 4.89 %260,488 3,304 5.14 %173,977 2,357 5.45 %
Other borrowingsOther borrowings117,688 325 1.11 %116,495 55 0.19 %17,920 0.09 %
Long-term debtLong-term debt274,515 3,500 5.11 %274,417 3,432 5.07 %256,492 3,339 5.22 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities5,146,148 9,830 0.77 %5,222,125 10,702 0.83 %5,418,013 17,382 1.29 %Total interest-bearing liabilities5,471,143 10,119 0.74 %5,441,411 7,828 0.58 %5,146,148 9,830 0.77 %
Noninterest-bearing depositsNoninterest-bearing deposits1,767,711 1,653,517 1,349,735 Noninterest-bearing deposits2,804,877 2,795,633 1,767,711 
Noninterest-bearing liabilitiesNoninterest-bearing liabilities98,174 97,136 118,208 Noninterest-bearing liabilities96,791 105,349 98,174 
Total liabilitiesTotal liabilities7,012,033 6,972,778 6,885,956 Total liabilities8,372,811 8,342,393 7,012,033 
Total stockholders’ equityTotal stockholders’ equity814,973 888,174 854,250 Total stockholders’ equity969,885 1,049,912 814,973 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,827,006 $7,860,952 $7,740,206 Total liabilities and stockholders’ equity$9,342,696 $9,392,305 $7,827,006 
Net interest income/spreadNet interest income/spread$59,847 3.04 %$57,916 2.95 %$55,315 2.77 %Net interest income/spread$78,299 3.30 %$76,441 3.29 %$59,847 3.04 %
Net interest margin (4)
3.27 %3.19 %3.09 %
Net interest margin (5)
Net interest margin (5)
3.58 %3.51 %3.27 %
Ratio of interest-earning assets to interest-bearing liabilitiesRatio of interest-earning assets to interest-bearing liabilities143 %141 %133 %Ratio of interest-earning assets to interest-bearing liabilities161 %162 %143 %
Total deposits(5)
6,221,336 3,543 0.23 %6,168,536 4,286 0.28 %5,773,581 10,205 0.71 %
Total funding (6)
6,913,859 9,830 0.57 %6,875,642 10,702 0.63 %6,767,748 17,382 1.03 %
Total deposits(6)
Total deposits(6)
7,398,188 3,180 0.17 %7,386,383 1,388 0.08 %6,221,336 3,543 0.23 %
Total funding (7)
Total funding (7)
8,276,020 10,119 0.49 %8,237,044 7,828 0.39 %6,913,859 9,830 0.57 %
(1)Includes average loans held for sale of $3.6 million, $3.4 million and $2.0 million for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, which are included in other assets in the accompanying consolidated statements of financial condition.
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(1)(2)Total loans are net of deferred fees, related direct costs, premiums and discounts. Nonaccrual loans are included in the average balance. NetInterest income includes net accretion (amortization) of deferred loan fees (costs) of $1.0 million, $1.4 million and$610 thousand, $1.1 million and (amortization) accretion$1.0 million and net amortization of (premium) discountpremium on purchased loans of $363 thousand, $(1.0) million $(411) thousand and $347 thousand$(1.0) million for the three months ended June 30, 2021,2022, March 31, 20212022 and June 30, 2020, respectively, are included in interest income.2021, respectively.
(2)(3)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.
(3)(4)Includes average balance of bank-owned life insurance of $112.7$124.8 million, $112.0$124.0 million and $110.4$112.7 million for the three months ended June 30, 2021,2022, March 31, 20212022 and June 30, 2020.2021, respectively.
(4)(5)Annualized net interest income divided by average interest-earning assets.
(5)(6)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of total deposits is calculated as annualized total interest expense on deposits divided by average total deposits.
(6)(7)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Three Months Ended June 30, 20212022 Compared to Three Months Ended March 31, 20212022
Net interest income increased $1.9 million to $59.8$78.3 million for the second quarter due to the higher yield on earning-assets, theinterest-earning assets, offset by lower costaverage interest-earning assets and volume ofhigher average interest-bearing liabilities balances and the impact of one additional day in the current quarter.costs.

The net interest margin increased 87 basis points to 3.27%3.58% for the second quarter from 3.19% for the first quarter as the average earning-assetsinterest-earning assets yield increased 317 basis points and the average cost of average total funding decreased 6increased 10 basis points. The yield on average interest-earning assets increased to 3.81%4.04% for the second quarter from 3.78%3.87% for the first quarter due mostly to an improved earning-asset the mix as excess liquidity was redeployed. Average securities increased $72.1 million while average otherof interest-earning assets decreased $77.5 million and loans decreased by $12.6 million.higher yields on loan and securities. The average yield on loans remained unchanged at 4.30%increased 9 basis points to 4.35% during the second quarter as a result of the portfolio mix and includedthe impact of higher market interest rates. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated discount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased the second quarter loan yield by 1810 basis points and the first quarter loan yield by 13 basis points. The average yield on securities increased 1 basis point to 2.14% between quarters, including a 4 basis points decrease in the average yield on collateralized loan obligations (CLOs) to 1.87% forboth the second quarter due mostly to an increase in fair value of such investments.

and prior quarter.
The average cost of funds decreased 6increased 10 basis points to 0.57%0.49% for the second quarter from 0.63%0.39% for the first quarter. This decreaseincrease was driven by the lowerhigher average cost of interest-bearing liabilities and improved funding mix, including higher average noninterest-bearing deposits. During the second quarter, average deposits increased $52.8 million, consisting of higher average noninterest-bearing deposits of $114.2 million and lower average interest-bearing deposits of $61.4 million. Average noninterest-bearing deposits represented 28%38% of total average deposits for both the second quarter and the first quarter. Average noninterest-bearing deposits were $9.2 million higher in the second quarter compared to 27% of totalthe first quarter while average deposits were $11.8 million higher for the first quarter.linked quarters. Average Federal Home Loan Bank (FHLB) advances decreased $28.5 million due to lower average term advances during the second quarter from maturities of term advances in the first and second quarters of 2021. Average long-term debt and other interest-bearing liabilitiesborrowings increased $13.9 million as a result of an increase in unsecured overnight borrowings from various financial institutions through the American Financial Exchange platform.$27.1 million. The average cost of interest-bearing liabilities decreased 6increased 16 basis points to 0.77%0.74% for the second quarter from 0.83%0.58% for the first quarter due to our continued efforts to actively manage down thehigher cost of interest-bearing deposits. The average cost of interest-bearing deposits declined 6increased 16 basis points to 0.32%0.28% for the second quarter from 0.38%0.12% for the first quarter. The average cost of total deposits decreased 5increased 9 basis points to 0.23%0.17% for the second quarter.quarter due mostly to higher market interest rates. The spot rate of total deposits was 0.21% at the end of the second quarter was 0.20%.quarter.

Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Net interest income for the second quarter of 20212022 increased $4.5 $18.5 million to $59.8$78.3 million from $55.3$59.8 million for the same 20202021 period. Net interest income was positively impacted by a higher average interest-earning assets, lower average interest-bearing liabilitiesa higher yield on such assets, and improved funding costs, offset by lowerhigher average interest-bearing liabilities. The 2022 operating results include the impact of acquiring PMB in the fourth quarter of 2021.

The net interest margin increased 31 basis points to 3.58% for the second quarter of 2022 as the average interest-earning assets yield increased 23 basis points and the average cost of total funding decreased 8 basis points. The average yield on interest-earning assets increased to 4.04% for the second quarter of 2022 from 3.81% for the same 2021 period due to the mix of interest-earning assets and higher yields on securities and other interest-earning assets as a result of higher market interest rates. The average interest-earningFederal funds rate was 0.77% for the second quarter of 2022 compared to 0.07% for the same 2021 period. Average loans increased by $1.50 billion from ongoing loan growth, including the loans from the acquisition of PMB. The average yield on loans increased 5 basis points to 4.35% for the second quarter of 2022, compared to 4.30% for the same 2021 period. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated
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assets. Average interest-earning assetsdiscount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased $142.2 million to $7.34 billion, and the net interest margin increased 18loan yield by 10 basis points to 3.27% forin the second quarter of 20212022 compared to 3.09% for the same 2020 period.

The net interest margin expanded due to a 4618 basis points decrease in the average cost of funds outpacing a 25 basis points decline in average interest-earning assets yield. The average yield on interest-earning assets decreased to 3.81% for the second quarter ofsame 2021 from 4.06% for the same 2020 period due mostly to the impact of lower market interest rates on loans and securities yields over this time period. The average yield on loans was 4.30% for the second quarter of 2021, compared to 4.48% for the same 2020 period and the average yield on securities decreased 81 basis points to 2.14% due mostly to CLOs repricing into the lower rate environment.

The average cost of funds decreased 8 basis points to 0.57%0.49% for the second quarter of 2021,2022, from 1.03%0.57% for the same 20202021 period. This decrease was driven by the lower average cost of interest-bearing liabilities and thedue to an improved funding mix, including higher average noninterest-bearing deposits.deposits as a result of the PMB acquisition and growth from ongoing business development efforts. Average noninterest-bearing deposits represented 38% of total average deposits for the second quarter of 2022, compared to 28% for the same 2021 period. Average noninterest-bearing deposits were $1.04 billion higher in the second quarter of 2022, compared to same 2021 period, while average deposits were $1.18 billion higher. Average FHLB advances and other borrowings increased $167.3 million due mostly to higher overnight borrowings, offset by lower term advances. The average cost of interest-bearing liabilities decreased 523 basis points to 0.77%0.74% for the second quarter of 20212022 from 1.29%0.77% for the same 20202021 period due to the combinationfunding mix including the impact of actively managing deposit pricing down inincluding deposits from the lower interest rate environment and the lower average cost of FHLB term advances resulting from maturities, early termination and refinancing of certain term advances during 2020. Compared to the same 2020 period, thePMB acquisition. The average cost of interest-bearing deposits declined 614 basis points to 0.28% for the second quarter of 2022, from 0.32% andfor the same 2021 period while the average cost of total deposits decreased 486 basis points to 0.23%. Additionally, average noninterest-bearing deposits increased by $418.0 million or 31.0%0.17% for the second quarter of 2021 when2022, compared to 0.23% for the same 20202021 period.


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The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates, on a consolidated operations basis, for the six months ended June 30, 2022 and 2021:
Six Months Ended June 30,
20222021
($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/Cost
Interest-earning assets:
Total loans (1)(2)
$7,266,234 $155,129 4.31 %$5,777,693 $123,245 4.30 %
Securities1,254,137 15,433 2.48 %1,272,383 13,487 2.14 %
Other interest-earning assets (3)
280,611 2,125 1.53 %297,465 1,563 1.06 %
Total interest-earning assets8,800,982 172,687 3.96 %7,347,541 138,295 3.80 %
Allowance for loan losses(93,422)(80,102)
BOLI and noninterest-earning assets (4)
659,804 576,446 
Total assets$9,367,364 $7,843,885 
Interest-bearing liabilities:
Interest-bearing checking$2,386,120 2,097 0.18 %$2,161,483 1,581 0.15 %
Savings and money market1,635,747 1,371 0.17 %1,646,269 4,634 0.57 %
Certificates of deposit570,170 1,100 0.39 %676,400 1,614 0.48 %
Total interest-bearing deposits4,592,037 4,568 0.20 %4,484,152 7,829 0.35 %
FHLB advances472,760 6,067 2.59 %432,286 6,056 2.83 %
Other borrowings117,095 379 0.65 %11,061 0.11 %
Long-term debt274,466 6,933 5.09 %256,427 6,641 5.22 %
Total interest-bearing liabilities5,456,358 17,947 0.66 %5,183,926 20,532 0.80 %
Noninterest-bearing deposits2,800,281 1,710,930 
Noninterest-bearing liabilities101,048 97,658 
Total liabilities8,357,687 6,992,514 
Total stockholders’ equity1,009,677 851,371 
Total liabilities and stockholders’ equity$9,367,364 $7,843,885 
Net interest income/spread$154,740 3.30 %$117,763 3.00 %
Net interest margin (5)
3.55 %3.23 %
Ratio of interest-earning assets to interest-bearing liabilities161 %142 %
Total deposits(6)
7,392,318 4,568 0.12 %6,195,082 7,829 0.25 %
Total funding (7)
8,256,639 17,947 0.44 %6,894,856 20,532 0.60 %
(1)Includes average loans held for sale of $3.5 million and $1.7 million for the six months ended June 30, 2022 and 2021, and 2020:
Six Months Ended June 30,
20212020
($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/Cost
Interest-earning assets:
Total loans (1)
$5,777,693 $123,245 4.30 %$5,744,214 $129,176 4.52 %
Securities1,272,383 13,487 2.14 %1,008,454 15,636 3.12 %
Other interest-earning assets (2)
297,465 1,563 1.06 %361,110 2,599 1.45 %
Total interest-earning assets7,347,541 138,295 3.80 %7,113,778 147,411 4.17 %
ACL(80,102)(69,499)
BOLI and noninterest-earning assets (3)
576,446 607,296 
Total assets$7,843,885 $7,651,575 
Interest-bearing liabilities:
Interest-bearing checking$2,161,483 1,581 0.15 %$1,615,480 5,915 0.74 %
Savings916,125 3,987 0.88 %898,414 6,013 1.35 %
Money market730,144 647 0.18 %600,899 2,610 0.87 %
Certificates of deposit676,400 1,614 0.48 %1,183,229 10,278 1.75 %
Total interest-bearing deposits4,484,152 7,829 0.35 %4,298,022 24,816 1.16 %
FHLB advances432,286 6,056 2.83 %929,110 10,701 2.32 %
Securities sold under repurchase agreements— — — 512 0.79 %
Long-term debt and other interest-bearing liabilities267,488 6,647 5.01 %174,017 4,716 5.45 %
Total interest-bearing liabilities5,183,926 20,532 0.80 %5,401,661 40,235 1.50 %
Noninterest-bearing deposits1,710,930 1,241,521 
Noninterest-bearing liabilities97,658 123,244 
Total liabilities6,992,514 6,766,426 
Total stockholders’ equity851,371 885,149 
Total liabilities and stockholders’ equity$7,843,885 $7,651,575 
Net interest income/spread$117,763 3.00 %$107,176 2.67 %
Net interest margin (4)
3.23 %3.03 %
Ratio of interest-earning assets to interest-bearing liabilities142 %132 %
Total deposits(5)
6,195,082 7,829 0.25 %5,539,543 24,816 0.90 %
Total funding (6)
6,894,856 20,532 0.60 %6,643,182 40,235 1.22 %
respectively, which are included in other assets in the accompanying consolidated statements of financial condition.
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(1)(2)Total loans are net of deferred fees, related direct costs, premiums and discounts, but exclude the allowance for credit losses. Nonaccrual loans are included in the average balance. Net accretion (amortization) of deferred loan fees (costs) of $2.4$1.7 million and $553 thousand$2.4 million and (amortization) accretion of (premium) discount on purchased loans of $(591) thousand and $(1.4) million and $355 thousand for the six months ended June 30, 20212022 and 2020,2021, respectively, are included in interest income.
(2)(3)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.
(3)(4)Includes average balance of bank-owned life insurance of $112.4$124.4 million and $110.2$112.4 million for the six months ended June 30, 20212022 and 2020.2021.
(4)(5)Annualized net interest income divided by average interest-earning assets.
(5)(6)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of total deposits is calculated as annualized total interest expense on deposits divided by average total deposits.
(6)(7)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Six Months Ended June 30, 20212022 Compared to Six Months Ended June 30, 20202021
Net interest income increased $37.0 million to $154.7 million for the six months ended June 30, 2021 increased $10.6 million2022 due to $117.8 million from $107.2 million for the same 2020 period. Net interest income was positively impacted by higher average balances and yield on interest-earning assets, higher average balances and lower costs of interest-bearing liabilities.
The net interest margin increased 32 basis points to 3.55% as the average interest-bearing liabilitiesearning-assets yield increased 16 basis points and improvedthe average cost of total funding costs, offset by lower yieldsdecreased 16 basis points. The yield on average interest-earning assets. For the six months ended June 30, 2021, average interest-earning assets increased $233.8 million to $7.35 billion, and the net interest margin increased 20 basis points to 3.23%3.96% for the six months ended June 30, 2022, from 3.80% for 2021 due mostly to the mix of interest-earning assets and higher market interest rates. Average loans represented 83% of average earnings assets in 2022 compared to 3.03%79% for the same 2020 period.

The net interest margin expanded due to a 62 basis point decreaseperiod in 2021. Average loans increased by $1.49 billion from ongoing loan growth, including the acquisition of PMB in the average costfourth quarter of funds outpacing a 37 basis point decline in the average interest-earning assets yield.2021. The average yield on interest-earning assets decreased to 3.80%average loans for the six months ended June 30, 2021, from 4.17%2022 was 4.31% compared to 4.30% for the same 2020 period due mostly to the impact of lower market interest ratesin 2021. The yield on loanaverage investment securities and securities yields over this time period. The average fed funds rateother interest-earning assets increased 34 basis points and 47 basis points, respectively, for the six months ended June 30, 2021 was 0.08%2022, compared to 0.66% for the same 2020 period. period in 2021.
The average yield on loans was 4.30%cost of funds decreased 16 basis points to 0.44% for the six months ended June 30, 2021, compared to 4.52% for the same 2020 period and the average yield on securities decreased 98 basis points to 2.14% due mostly to CLOs repricing into the lower rate environment.

The average cost of funds decreased to2022 from 0.60% for the six months ended June 30, 2021, from 1.22% for the same 2020 period.2021. This decrease was driven by the lower average cost of interest-bearing liabilities and the overall improved funding mix, including higher average noninterest-bearing deposits.deposits as a result of growth from the acquisition of PMB and continuous business development efforts. Average noninterest-bearing deposits represented 38% of total average deposits for the six months ended June 30, 2022 compared to 28% for the same period in 2021. Average noninterest-bearing deposits were $1.09 billion higher during the six months ended June 30, 2022 compared to the same period in 2021 while average total deposits were $1.20 billion higher. Average FHLB advances and other borrowings increased $146.5 million due mostly to higher overnight borrowings offset by lower term advances. The average cost of interest-bearing liabilities decreased 7014 basis points to 0.80%0.66% for the six months ended June 30, 2021 from 1.50% for the same 2020 period due to the combination of actively managing deposit pricing down in the lower interest rate environment and the lower average cost of FHLB term advances resulting from maturities, early termination and refinancing of certain term advances during 2020. Compared2022 compared to the same 2020 period in 2021. This included a 15 basis points decline in the average cost of interest-bearing deposits declined 81 basis points to 0.35% and the average cost of total deposits decreased 65 basis points to 0.25%. Additionally, average noninterest-bearing deposits increased by $469.4 million, or 37.8%,0.20% for the six months ended June 30, 2021 when2022 compared to 0.35% for the same 2020 period.period in 2021. The average cost of total deposits decreased 13 basis points to 0.12% for the six months ended June 30, 2022.



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Rate/Volume Analysis
The following table presents the changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities. The information provided presents the changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
Three Months Ended
June 30, 2021 vs. 2020
Six Months Ended
June 30, 2021 vs. 2020
Three Months Ended
June 30, 2022 vs. 2021
Six Months Ended
June 30, 2022 vs. 2021
Increase (Decrease) Due toNet Increase (Decrease)Increase (Decrease) Due toNet
Increase (Decrease)
Increase (Decrease) Due toNet
Increase (Decrease)
Increase (Decrease) Due toNet
Increase (Decrease)
($ In thousands)($ In thousands)VolumeRateVolumeRate($ In thousands)VolumeNet
Increase (Decrease)
VolumeNet
Increase (Decrease)
Interest and dividend income:Interest and dividend income:Interest and dividend income:
Total loansTotal loans$736 $(2,478)$(1,742)$706 $(6,637)$(5,931)Total loans$16,267 $728 $16,995 $31,598 $286 $31,884 
SecuritiesSecurities1,579 (2,409)(830)3,478 (5,627)(2,149)Securities(518)1,656 1,138 (194)2,140 1,946 
Other interest-earning assetsOther interest-earning assets(509)61 (448)(410)(626)(1,036)Other interest-earning assets123 485 608 (93)655 562 
Total interest and dividend incomeTotal interest and dividend income$1,806 $(4,826)$(3,020)$3,774 $(12,890)$(9,116)Total interest and dividend income$15,872 $2,869 $18,741 $31,311 $3,081 $34,392 
Interest expense:Interest expense:Interest expense:
Interest-bearing checkingInterest-bearing checking$483 $(1,990)$(1,507)$1,524 $(5,858)$(4,334)Interest-bearing checking$55 $723 $778 $177 $339 $516 
Savings(6)(738)(744)116 (2,142)(2,026)
Money market168 (748)(580)459 (2,422)(1,963)
Savings and money marketSavings and money market(411)(973)(1,384)(756)(2,507)(3,263)
Certificates of depositCertificates of deposit(1,512)(2,319)(3,831)(3,216)(5,448)(8,664)Certificates of deposit(2)245 243 (234)(280)(514)
FHLB advancesFHLB advances(2,675)801 (1,874)(6,622)1,977 (4,645)FHLB advances447 (277)170 545 (534)11 
Securities sold under repurchase agreements(1)(1)(2)(1)(1)(2)
Long-term debt and other interest-bearing liabilities1,250 (264)986 2,339 (408)1,931 
Other borrowingsOther borrowings104 217 321 246 127 373 
Long-term debtLong-term debt227 (66)161 460 (168)292 
Total interest expenseTotal interest expense(2,293)(5,259)(7,552)(5,401)(14,302)(19,703)Total interest expense420 (131)289 438 (3,023)(2,585)
Net interest incomeNet interest income$4,099 $433 $4,532 $9,175 $1,412 $10,587 Net interest income$15,452 $3,000 $18,452 $30,873 $6,104 $36,977 

Provision for Credit Losses
The provision for credit losses is charged to operations to adjust the allowance for credit losses to the level required to cover current expected credit losses in our loan portfolio and unfunded commitments. The following table presents the components of our provision for credit losses:
Three Months EndedSix Months Ended June 30,Three Months EndedSix Months Ended June 30,
($ in thousands)($ in thousands)June 30,
2021
March 31,
2021
June 30,
2020
20202019($ in thousands)June 30,
2022
March 31,
2022
June 30,
2021
20222021
(Reversal of) provision for loan losses(Reversal of) provision for loan losses$(2,608)$(1,284)$11,519 $(3,892)$26,230 (Reversal of) provision for loan losses$(500)$(31,342)$(2,608)$(31,842)$(3,892)
Provision for (reversal of) credit losses - unfunded loan commitments454 177 307 631 1,357 
(Reversal of) provision for credit losses - unfunded loan commitments(Reversal of) provision for credit losses - unfunded loan commitments500 (200)454 300 631 
Total (reversal of) provision for credit lossesTotal (reversal of) provision for credit losses$(2,154)$(1,107)$11,826 $(3,261)$27,587 Total (reversal of) provision for credit losses$ $(31,542)$(2,154)$(31,542)$(3,261)
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Three Months Ended June 30, 20212022 Compared to Three Months Ended March 31, 20212022
TheThere was no provision for credit losses was a reversal of $2.2 million for the second quarter, compared to a reversal of $1.1$31.5 million for the first quarter. The first quarter reversal of credit losses included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019.
Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021
There was no provision for credit losses for the second quarter of 2022, compared to a reversal of $2.2 million for the same 2021 period. The second quarter reversal of credit losses in the second quarter of 2021 was due primarily to improvements in
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key macro-economic forecast variables, such as unemploymentemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $221.1 million.metric.
ThreeSix Months Ended June 30, 20212022 Compared to ThreeSix Months Ended June 30, 20202021
TheDuring the six months ended June 30, 2022, the provision for credit losses was a reversal of $2.2$31.5 million, for the second quarter of 2021, compared to a provision of $11.8 million for the same 2020 period. The lower provision for credit losses was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $357.8 million.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The provision for credit losses was a reversal of $3.3 million during 2021. The higher reversal of credit losses for the six months ended June 30, 2021, compared to a provision of $27.6 million during the same 2020 period. The lower provision for credit losses2022 was due primarily to improvementsthe recovery from the settlement of a loan previously charged-off in key macro-economic forecast variables, such as unemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $357.8 million.2019.
See further discussion in "Allowance for Credit Losses."

Noninterest Income
The following table presents the components of noninterest income for the periods indicated:
Three Months EndedSix Months Ended June 30,Three Months EndedSix Months Ended June 30,
($ in thousands)($ in thousands)June 30,
2021
March 31,
2021
June 30,
2020
20212020($ in thousands)June 30,
2022
March 31,
2022
June 30,
2021
20222021
Customer service feesCustomer service fees$1,990 $1,758 $1,224 $3,748 $2,320 Customer service fees$2,578 $2,434 $1,990 $5,012 $3,748 
Loan servicing incomeLoan servicing income38 268 95 306 170 Loan servicing income109 212 38 321 306 
Income from bank owned life insuranceIncome from bank owned life insurance690 672 591 1,362 1,169 Income from bank owned life insurance810 796 690 1,606 1,362 
Net gain on sale of securities available-for-saleNet gain on sale of securities available-for-sale— — 2,011 — 2,011 Net gain on sale of securities available-for-sale— 16 — 16 — 
Fair value adjustment on loans held-for-sale20 — 25 20 (1,561)
Net loss on sale of loans— — — — (27)
Other incomeOther income1,432 1,683 1,582 3,115 3,507 Other income3,689 2,452 725 6,141 2,836 
Total noninterest incomeTotal noninterest income$4,170 $4,381 $5,528 $8,551 $7,589 Total noninterest income$7,186 $5,910 $3,443 $13,096 $8,252 

Three Months Ended June 30, 20212022 Compared to Three Months Ended March 31, 20212022
Noninterest income decreased $211 thousand,increased $1.3 million to $4.2$7.2 million for the second quarter of 2022 compared to the prior quarter due mostly to lower servicing income as a result of reductions in servicing balances from payoffs and repurchases and lowerhigher other income. All other income from fluctuations in customer swap activity, offset by higher customer service fees. Customer service fees increased by $232 thousand$1.2 million due to higher loan feesincome from equity investments of $91$2.1 million, partially offset by a fair value write-down of $455 thousand duerecorded on loans held for sale and the first quarter including a $771 thousand gain related to extension feesa sale-leaseback transaction; there were no sale-leaseback transactions in the second quarter. Gains or losses from equity investments are recorded based on the most recent information available from the investee and higher deposit activity fees of $140 thousand attributed to higher average deposit balances and our initiative to bring our service fee schedules more in line with market.
fluctuate based on their underlying performance.
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Noninterest income for the second quarter of 2021 decreased $1.42022 increased $3.7 million to $4.2$7.2 million compared to the same 20202021 period. The decreaseincrease in noninterest income was mainly due mostly to an increase in customer services fees and other income and reflected a decrease in net gains from sales of securities offset by higher customer service fees. The were no gains from sale of securities for the secondfull quarter of 2021, compared to $2.0 million in net gains in the same 2020 periodactivity from the saleacquisition of $20.7 million in securities, primarily consisting of corporate securities.PMB. The $766$588 thousand increase in customer services fees was due to higher loan fees of $210 thousand and higher deposit and interchange fees of $555 thousand. The increase in deposit activity fees is attributedmostly to higher average deposit balances, and our initiativebalances. The $3.0 million increase in other income was due mostly to bring our service fee schedules more in line with market.higher income from equity investments of $2.9 million.

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Six Months Ended June 30, 20212022 Compared to Six Months Ended June 30, 20202021
Noninterest income for the six months ended June 30, 20212022 increased $1.0$4.8 million to $8.6$13.1 million compared to the same 20202021 period. The increase in noninterest income reflected a full six months of activity from the acquisition of PMB and was mainly due to higher customer service fees, income from bank-owned life insurance, and lower fair value adjustment for loans held for sale, offset by lower net gain on sale of securities. The $1.4 million increase in customerall other income. Customer services fees wasincreased $1.3 million due mostly to higher loan fees of $363 thousand and higher deposit and interchange fees of $1.1 million. The increase in deposit activity fees isof $1.8 million attributed to higher average deposit balances, and our initiative to bring our service fee schedules more in line with market. Fair value adjustment for loans held for sale improved $1.6 million as the comparable period included valuation losses on loans held for saleoffset by lower loan fees of $594 thousand. Income from bank-owned life insurance increased $244 thousand due to higher average balances from PMB. The $3.3 million increase in all other income is due mostly to higher income from equity investments of $2.4 million and a $771 thousand gain related to a sale-leaseback transaction during the impactfirst quarter of the decreases in market interest rates; there were no similar losses in 2021. There were no gains from sale of securities for the six months ended June 30, 2021, compared to $2.0 million in net gains in the same 2020 period from the sale of $20.7 million in securities, primarily consisting of corporate securities.2022.

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Noninterest Expense
The following table presents the breakdown of noninterest expense for the periods indicated:
Three Months EndedSix Months Ended June 30,Three Months EndedSix Months Ended June 30,
($ in thousands)($ in thousands)June 30,
2021
March 31,
2021
June 30,
2020
20212020($ in thousands)June 30,
2022
March 31,
2022
June 30,
2021
20222021
Salaries and employee benefitsSalaries and employee benefits$25,042 $25,719 $24,260 $50,761 $47,696 Salaries and employee benefits$28,264 $28,987 $25,042 $57,251 $50,761 
Naming rights termination— — 26,769 — 26,769 
Occupancy and equipmentOccupancy and equipment7,277 7,196 7,090 14,473 14,333 Occupancy and equipment7,876 7,855 7,277 15,731 14,473 
Professional feesProfessional fees1,749 4,022 4,596 5,771 10,560 Professional fees4,107 2,907 1,749 7,014 5,771 
Data processingData processing1,621 1,655 1,536 3,276 3,309 Data processing1,782 1,828 1,621 3,610 3,276 
Advertising78 118 1,157 196 2,913 
Regulatory assessmentsRegulatory assessments769 774 725 1,543 1,209 Regulatory assessments1,021 775 769 1,796 1,543 
Reversal of provision for loan repurchasesReversal of provision for loan repurchases(99)(132)(34)(231)(634)Reversal of provision for loan repurchases(490)(471)(99)(961)(231)
Amortization of intangible assetsAmortization of intangible assets282 282 430 564 859 Amortization of intangible assets313 441 282 754 564 
Merger-related costsMerger-related costs700 700 — 1,400 — Merger-related costs— — 700 — 1,400 
All other expenseAll other expense3,969 2,771 6,408 6,740 10,937 All other expense4,696 4,116 3,320 8,812 6,637 
Noninterest expense before (gain) loss on investments in alternative energy partnerships41,388 43,105 72,937 84,493 117,951 
(Gain) loss on investments in alternative energy partnerships(829)3,630 (167)2,801 1,738 
Noninterest expense before loss (gain) on investments in alternative energy partnershipsNoninterest expense before loss (gain) on investments in alternative energy partnerships47,569 46,438 40,661 94,007 84,194 
Loss (gain) on investments in alternative energy partnershipsLoss (gain) on investments in alternative energy partnerships1,043 158 (829)1,201 2,801 
Total noninterest expenseTotal noninterest expense$40,559 $46,735 $72,770 $87,294 $119,689 Total noninterest expense$48,612 $46,596 $39,832 $95,208 $86,995 

Three Months Ended June 30, 20212022 Compared to Three Months Ended March 31, 20212022
Noninterest expense decreased $6.2increased $2.0 million to $40.6$48.6 million for the second quarter compared to the prior quarter. The decreaseincrease was primarily due mostly to lower(i) higher professional fees of $2.3$1.2 million, related mainly to higher legal fees and (ii) higher net gainloss in alternative energy partnership investments of $4.5 million,$885 thousand. These increases were offset by a decrease in salaries and employee benefits of $723 thousand attributed to higher all other expensepayroll-related items typical of $1.2 million.the first quarter. Professional fees included net recoveries of indemnified legal expenses of $1.3 million in the second quarter compared to net indemnified legal expenses of $721 thousand during the first quarter. The increase in all other expense was due to a $1.2 million increase in net losses on equity investments due to net losses of $727$455 thousand in the second quarter compared to net gainsrecoveries of $428$106 thousand induring the first quarter.

Total operating costs, defined as noninterest expense adjusted for certain expense items (refer to section Non-GAAP Measures), increased $570 thousand to $47.1 million for the second quarter compared to $46.5 million for the prior quarter. Our equity investments without readily determinable fair values include investments in privately held companiesThis increase was due mostly to the combination of (i) higher professional fees of $639 thousand related to business initiatives, (ii) higher all other expenses of $580 thousand related mostly to loan-related expenses, and limited partnerships(iii) lower salaries and our income or loss from these investments fluctuates based on their underlying performance.
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Tablebenefits of Contents$723 thousand due to the higher payroll-related items typical of the first quarter.
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Noninterest expense was $40.6$48.6 million for the second quarter of 2021, a decrease2022, an increase of $32.2$8.8 million from $72.8$39.8 million for the comparable 2020 period.2021 period due mostly to including PMB's operations since the date of acquisition. The decrease was mainly due toincrease included (i) the same 2020 period including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, (ii) lower professional fees of $2.8 million, due to overall reductions in indemnified legal fees for resolved legal proceedings and various other litigations, (iii) lower advertising costs of $1.1 million due to the termination of our LAFC agreements in May 2020, (iv) lower all other expenses of $2.4 million resulting from the aforementioned debt extinguishment fee and (v) a higher gain on alternative energy partnerships of $662 thousand from decreased loss sharing allocations. These increases were offset by higher salaries and employee benefits of $782$3.2 million due to a higher number of employees, (ii) higher occupancy and equipment of $599 thousand, due to additional facilities, (iii) higher commissionsprofessional fees of $2.4 million, due mostly to higher legal fees, net of insurance recoveries (iv) higher loss on investments in alternative energy partnerships of $1.9 million, and incentive-based compensation and(iv) higher all other expense of $1.4 million. These increases were offset by lower merger-related costs of $700 thousand associated with our proposed merger with PMBCresulting from completion of the PMB acquisition and system conversion in the fourth quarter of 2021.

Six Months Ended June 30, 20212022 Compared to Six Months Ended June 30, 20202021
Noninterest expense for the six months ended June 30, 2021 decreased $32.42022 increased $8.2 million to $87.3$95.2 million compared to the prior year.year due mostly to including PMB's operations since the date of acquisition. The decreaseincrease was primarily due to: (i) the same 2020 period including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, (ii) lower professional fees of $4.8 million, due to overall reductions in indemnified legal fees for resolved legal proceedings and various other litigations, (iii) lower advertising fees of $2.7 million due to the termination of our LAFC agreements in May 2020 and (iv) lower all other expense of $4.2 million resulting from overall expense reduction efforts, the comparable 2020 period including the aforementioned $2.5 million debt extinguishment fee and a $1.2 million charge to settle and conclude two legacy legal matters, and a $304 thousand increase in loss on equity investments between periods. These decreases were partially offset by higher (i) salaries and employee benefits of $3.1$6.5 million, (ii) higher occupancy and equipment of $1.3 million, (iii) higher professional fees of $1.2 million, due mostly to a $1.9 million increase in legal fees, net of insurance recoveries, offset by a $619 thousand decrease in other professional fees and (iv) higher commissions and incentive-based compensation,all other expenses of $2.2 million. These increases were partially offset by: (i) higher reversal of loan repurchase reserves of $730 thousand, (ii) lower merger-related costs of $1.4 million associated with our proposed merger with PMBC, and (iii) net losseslower loss in alternative energy partnership investments of $1.1$1.6 million.

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Income Tax (Benefit) Expense
For the three months ended June 30, 2021,2022, March 31, 20212022 and June 30, 2020,2021, income tax expense (benefit) was $6.6$10.2 million, $2.3$18.8 million, and $(5.3)$6.6 million, resulting in an effective tax rate of 25.6%27.6%, 13.8%27.9% and 22.3%25.6%, respectively. Our 25.6%The effective tax rate for the three months ended June 30, 2021 differs from the 29.5% statutory rate due to the impact of various permanent tax differences, tax credits and other discrete items. Our effective tax rate2022 is expected to be insimilar to the 25% to 27% rangeeffective income tax rate for the remainder of 2021.second quarter.
ForIncome tax expense totaled $28.9 million for the six months ended June 30, 2021 and 2020, income taxes were2022, representing an expenseeffective tax rate of 27.8%, compared to $8.9 million and a benefit of $7.5 million, resulting in an effective tax rate of 20.9% and 23.0%, respectively. Duringfor 2021. The effective tax rate for the six months ended June 30, 2022 was higher than the comparable 2021 incomeperiod due mostly to the first quarter of 2021 including a net tax expense included abenefit of $2.1 million tax benefitresulting from the exercise of all previously issued outstanding stock appreciation rights.

For additional information, see Note 8 to Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.


FINANCIAL CONDITION
Investment Securities
At June 30, 2021, all of our investment securities were classified as available-for-sale.
The primary goal of our investment securities portfolio is to provide a relatively stable source of interest income while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk, and interest rate risk. Certain investment securities provide a source of liquidity as collateral for FHLB advances, Federal Reserve Discount Window capacity, repurchase agreements, and certain public deposits.
Investment Securities Held-to-Maturity
Securities held-to-maturity totaled $329.3 million at June 30, 2022 and included $215.1 million in agency securities and $114.2 million in municipal securities. During the first quarter of 2022, we transferred certain longer-duration fixed-rate mortgage-backed securities and municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio to lower the adverse impact rising interest rates may have on the fair value of such securities. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which along with the related unrealized loss in accumulated other comprehensive income, is amortized into interest income as a yield adjustment over the remaining term of the securities. As a result, there is no impact on the consolidated statements of operations.
The following table presents the amortized cost and fair value of investment securities held-to-maturity as of the dates indicated:
June 30, 2022December 31, 2021
($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$153,621 $135,287 $(18,334)$— $— $— 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations61,447 53,396 (8,051)— — — 
Municipal securities114,204 96,989 (17,215)— — — 
Total securities held-to-maturity$329,272 $285,672 $(43,600)$ $ $ 

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Investment Securities Available-for-Sale
The following table presents the amortized cost and fair value of the investment securities available for sale portfolio and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income as of the dates indicated:
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$16,301 $16,223 $(78)$17,436 $17,354 $(82)SBA loan pool securities$13,085 $13,062 $(23)$14,679 $14,591 $(88)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities191,029 197,685 6,656 99,591 106,384 6,793 U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities12,051 11,365 (686)190,382 191,969 1,587 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations262,515 265,184 2,669 209,426 211,831 2,405 U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations160,657 154,053 (6,604)242,458 241,541 (917)
Municipal securitiesMunicipal securities117,996 120,980 2,984 64,355 68,623 4,268 Municipal securities— — — 117,913 119,015 1,102 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities151 155 156 160 Non-agency residential mortgage-backed securities53,122 45,481 (7,641)56,014 56,025 11 
Collateralized loan obligationsCollateralized loan obligations587,275 584,307 (2,968)687,505 677,785 (9,720)Collateralized loan obligations492,775 478,203 (14,572)521,275 518,964 (2,311)
Corporate debt securitiesCorporate debt securities156,988 168,620 11,632 141,975 149,294 7,319 Corporate debt securities165,266 163,271 (1,995)162,002 173,598 11,596 
Total securities available-for-saleTotal securities available-for-sale$1,332,255 $1,353,154 $20,899 $1,220,444 $1,231,431 $10,987 Total securities available-for-sale$896,956 $865,435 $(31,521)$1,304,723 $1,315,703 $10,980 

Securities available-for-sale were $1.35 billion$865.4 million at June 30, 2021, an increase2022, a decrease of $121.7$450.3 million, or 9.9%34.2%, from $1.23$1.32 billion at December 31, 2020.2021. The increasedecrease was mainly due to the aforementioned transfer of certain securities to the held-to-maturity portfolio, collateralized loan obligation (CLO) payoffs of $28.5 million, principal payments of $20.2 million, sales of $17.6 million and higher unrealized net losses of $42.5 million, offset by purchases of $226.8$5.0 million.
Net unrealized losses on securities available-for-sale were $31.5 million including $158.1at June 30, 2022, compared to a net unrealized gain of $11.0 million at December 31, 2021. The net unrealized gain or loss on securities available-for-sale, net of tax, is reflected in U.S. government agency securities, $53.7 millionaccumulated other comprehensive income. Increases in municipal securities and $15.0 millionlonger term market interest rates resulted in corporate securities and higher net unrealized gains of $9.9 million, offset by callslosses in our securities portfolio and redemptions of CLOs totaling $100.2 millionstockholders’ equity. As market interest rates increase, bond prices tend to fall and, principal reductions of $14.0 million. The increase in unrealized net gains was due mostly to improved pricing of CLOs and corporate debt securities due to lower credit spreads, offset by decreases inconsequently, the fair value of municipalour securities may also decrease. To this end, we may have further net unrealized losses on our securities classified as available–for-sale, which would negatively affect our total and mortgage-backed securities as a result of increases in longer term interest rates during the year.tangible stockholders’ equity.
CLOs totaled $584.3$478.2 million and $677.8$519.0 million and were all AAA and AA rated at June 30, 20212022 and December 31, 2020.2021. We perform due diligence and ongoing credit quality review of our CLO holdings, which includes monitoring performance factors such as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors.
We did not record credit impairment for any investment securities for the three and six months ended June 30, 20212022 or 2020.2021. We monitor our securities portfolio to ensure it has adequate credit support.support and we consider the lowest credit rating for identification of potential credit impairment. As of June 30, 2021,2022, we believe there was no credit impairment and we did not have the current intent to sell securities with a fair value below amortized cost at June 30, 2021,2022, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. We consider the lowest credit rating for identification of potential credit impairment. As of June 30, 2021,2022, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net increasedecreases in fair value during the yearperiod were attributable to a combination of changes in interest rates and credit market conditions.

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The following table presents maturities,the fair values and weighted average yields using amortized cost of the securities held-to-maturity portfolio as of June 30, 2022, based on the earlier of contractual maturity dates or next repricing dates,dates:
One Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Fair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average Yield
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$— — %$— — %$— — %$135,287 2.69 %$135,287 2.69 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations— — %— — %— — %53,396 2.64 %53,396 2.64 %
Municipal securities— — %— — %17,134 2.19 %79,855 2.71 %96,989 2.62 %
Total securities held-to-maturity$  %$  %$17,134 2.19 %$268,538 2.68 %$285,672 2.66 %

The following table presents the fair values and yield informationweighted average yields using amortized cost of the investment securities available-for-sale portfolio as of June 30, 2021:2022, based on the earlier of contractual maturity dates or next repricing dates:
One Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotalOne Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)($ in thousands)Fair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average Yield($ in thousands)Fair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average Yield
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pools securitiesSBA loan pools securities$16,223 1.53 %$— — %$— — %$— — %$16,223 1.53 %SBA loan pools securities$13,062 1.06 %$— — %$— — %$— — %$13,062 1.06 %
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities— — %— — %29,694 2.20 %167,991 2.15 %197,685 2.15 %U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities— — %— — %11,365 2.23 %— — %11,365 2.23 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations109,168 0.64 %11,360 1.98 %43,331 1.34 %101,325 1.80 %265,184 1.25 %U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations86,602 1.73 %9,630 2.24 %35,518 1.55 %22,303 1.81 %154,053 1.73 %
Municipal securities— — %— — %15,469 2.62 %105,511 2.38 %120,980 2.41 %
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities— — %— — %— — %155 6.35 %155 6.35 %Non-agency residential mortgage-backed securities— — %— — %— — %45,481 2.51 %45,481 2.51 %
Collateralized loan obligationsCollateralized loan obligations584,307 1.82 %— — %— — %— — %584,307 1.82 %Collateralized loan obligations478,203 2.70 %— — %— — %— — %478,203 2.70 %
Corporate debt securitiesCorporate debt securities— — %150,108 4.82 %18,512 5.73 %— — %168,620 4.91 %Corporate debt securities— — %149,641 4.71 %13,630 5.73 %— — %163,271 4.80 %
Total securities available-for-saleTotal securities available-for-sale$709,698 1.64 %$161,468 4.62 %$107,006 2.41 %$374,982 2.12 %$1,353,154 2.17 %Total securities available-for-sale$577,867 2.52 %$159,271 4.56 %$60,513 2.52 %$67,784 2.29 %$865,435 2.87 %

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Loans Held-for-Sale
Total loans held-for-sale carried at fair value were $2.9 million at June 30, 2021 and $1.4 million at December 31, 2020 and consisted mainly of repurchased conforming SFR mortgage loans that were previously sold and repurchased GNMA loans that were previously sold and became delinquent more than 90 days.

Loans Receivable, Net
The following table presents the composition of our loan and lease portfolio as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2021
December 31, 2020Amount ChangePercentage Change($ in thousands)June 30,
2022
December 31, 2021Amount ChangePercentage Change
Commercial:Commercial:Commercial:
Commercial and industrial(1)Commercial and industrial(1)$2,070,910 $2,088,308 $(17,398)(0.8)%Commercial and industrial(1)$2,433,464 $2,668,984 $(235,520)(8.8)%
Commercial real estateCommercial real estate871,790 807,195 64,595 8.0 %Commercial real estate1,204,414 1,311,105 (106,691)(8.1)%
MultifamilyMultifamily1,325,770 1,289,820 35,950 2.8 %Multifamily1,572,308 1,361,054 211,254 15.5 %
SBA(1)(2)
SBA(1)(2)
253,924 273,444 (19,520)(7.1)%
SBA(1)(2)
92,235 205,548 (113,313)(55.1)%
ConstructionConstruction150,557 176,016 (25,459)(14.5)%Construction228,341 181,841 46,500 25.6 %
Total commercial loansTotal commercial loans5,530,762 5,728,532 (197,770)(3.5)%
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage1,288,176 1,230,236 57,940 4.7 %Single family residential mortgage1,832,279 1,420,023 412,256 29.0 %
Other consumerOther consumer24,350 33,386 (9,036)(27.1)%Other consumer88,223 102,925 (14,702)(14.3)%
Total loans(2)
5,985,477 5,898,405 87,072 1.5 %
Total consumer loansTotal consumer loans1,920,502 1,522,948 397,554 26.1 %
Total loans(3)
Total loans(3)
7,451,264 7,251,480 199,784 2.8 %
Allowance for loan lossesAllowance for loan losses(75,885)(81,030)5,145 (6.3)%Allowance for loan losses(93,793)(92,584)(1,209)1.3 %
Total loans receivable, netTotal loans receivable, net$5,909,592 $5,817,375 $92,217 1.6 %Total loans receivable, net$7,357,471 $7,158,896 $198,575 2.8 %
(1)Includes 994warehouse lending balances of $1.16 billion and $1.60 billion at June 30, 2022 and December 31, 2021.
(2)Includes 79 PPP loans totaling $193.9$28.4 million, net of unamortized loan fees totaling $3.9 million$10 thousand at June 30, 20212022 and 949397 PPP loans totaling $210.0$123.1 million, net of unamortized loan fees totaling $1.6 million$772 thousand at December 31, 2020.2021.
(2)(3)Total loans include net deferred loan origination costs (fees), purchased premiums (discounts), and fair value allocations of premiums (discounts) of $7.9totaling $14.4 million and $6.2$5.5 million at June 30, 20212022 and December 31, 2020.2021.

Held-for-investmentGross loans increased $87.1$199.8 million to $5.99$7.45 billion from December 31, 2020, resulting from higher2021 due to loan fundings of $2.18 billion, including single-family residential purchases of $641.5 million. During the first quarter of 2022, $150.1 million of owner-occupied commercial real estate loans of $64.6 million, multifamily loans of $36.0 million and single family residential loans of $57.9 million, offset by loweracquired in the PMB acquisition were moved to the other commercial and industrial (C&I) loans of $17.4 million due, in part, to decreased utilization of credit facilities and lower construction loans of $25.5 million due to prepayment activity.category from the commercial real estate category. SBA loans also decreased by $19.5$113.3 million due mostly from the SBA processing forgiveness requests of $157.8 million offset by $143.7 million in new PPP loans originated.requests. At June 30, 2021,2022, SBA loans included $193.9$28.4 million of PPP loans, net of fees.compared to $123.1 million at December 31, 2021.
Total commercial loans, excluding PPP loans and warehouse lending, increased $256.2 million, or 25.1% on an annualized basis during the second quarter.

During the year, we purchased $366.0 million in loans, comprised of single family residential loans of $336.2 million and multifamily loans of $29.8 million.

We continue to focus the real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. As of June 30, 2021,2022, loans secured by residential real estate (single-family, multifamily, single-family construction, warehouse lending credit facilities and credit facilities)commercial real estate) represent approximately 69%66% of our total loans outstanding.

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Credit Quality Indicators
We categorize loans into risk categories based on relevant information about the ability of borrowers to repay their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We perform a historical loss analysis that is combined with a comprehensive loan to value analysis to analyze the associated risks in the current loan portfolio. We analyze loans individually and grade each loan for credit risk. This analysis includes all loans delinquent over 60 days and non-homogeneous loans such as commercial and commercial real estate loans.
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The following table presents the risk categories for total loans by class of loans as of June 30, 20212022 and December 31, 2020:2021:
($ in thousands)($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal
June 30, 2021
June 30, 2022June 30, 2022
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$1,970,948 $52,099 $47,712 $151 $2,070,910 Commercial and industrial$2,316,651 $45,405 $71,408 $— $2,433,464 
Commercial real estateCommercial real estate828,933 26,558 15,158 1,141 871,790 Commercial real estate1,186,719 3,679 14,016 — 1,204,414 
MultifamilyMultifamily1,268,917 54,908 1,945 — 1,325,770 Multifamily1,537,480 16,133 18,695 — 1,572,308 
SBASBA238,512 3,168 11,763 481 253,924 SBA75,278 5,221 11,736 — 92,235 
ConstructionConstruction141,443 9,114 — — 150,557 Construction219,794 8,547 — — 228,341 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage1,254,045 11,002 23,129 — 1,288,176 Single family residential mortgage1,817,068 6,218 8,993 — 1,832,279 
Other consumerOther consumer24,159 92 99 — 24,350 Other consumer87,727 145 351 — 88,223 
TotalTotal$5,726,957 $156,941 $99,806 $1,773 $5,985,477 Total$7,240,717 $85,348 $125,199 $ $7,451,264 

($ in thousands)($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal
December 31, 2020
December 31, 2021December 31, 2021
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$2,019,701 $17,232 $51,375 $— $2,088,308 Commercial and industrial$2,550,540 $65,659 $52,785 $— $2,668,984 
Commercial real estateCommercial real estate760,612 30,485 16,098 — 807,195 Commercial real estate1,292,837 4,845 13,423 — 1,311,105 
MultifamilyMultifamily1,284,995 2,853 1,972 — 1,289,820 Multifamily1,312,038 46,314 2,702 — 1,361,054 
SBASBA264,851 3,275 4,837 481 273,444 SBA181,129 6,040 18,379 — 205,548 
ConstructionConstruction167,485 8,531 — — 176,016 Construction171,731 10,110 — — 181,841 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage1,202,758 11,853 15,625 — 1,230,236 Single family residential mortgage1,395,785 10,423 13,815 — 1,420,023 
Other consumerOther consumer31,823 1,215 348 — 33,386 Other consumer102,538 92 295 — 102,925 
TotalTotal$5,732,225 $75,444 $90,255 $481 $5,898,405 Total$7,006,598 $143,483 $101,399 $ $7,251,480 

Loans risk rated special mention increased $81.5decreased $58.1 million to $156.9$85.3 million at June 30, 20212022 compared to $75.4$143.5 million at December 31, 20202021 due mostly to downgrades of certain multifamily andactivity within the commercial and industrial and multifamily loans offset by loanthat included payoffs of $25.5 million and loan amortization.net migration out of special mention of $27.7 million. Loans risk rated substandard increased $9.6$23.8 million to $99.8$125.2 million at June 30, 20212022 compared to $90.3$101.4 million at December 31, 20202021 due mostly to downgradesthe addition of certain single family residentialone multifamily loan for $17.5 million and three commercial and industrial relationships of $19.6 million. There were no loans risk rated doubtful at June 30, 2022 and the repurchase of $6.5 million of guaranteed SBA loans pending resolution, offset by upgrades and payoffs.December 31, 2021.

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The commercial and industrial ("C&I&I") portfolio has limited exposure to certain business sectors undergoing severe stress as a result of the pandemic. The C&I industry concentrations in dollars and as a percentage of total outstanding C&I loan balances are summarized below:
June 30, 2021June 30, 2022
($ in thousands)($ in thousands)Amount% of Portfolio($ in thousands)Amount% of Portfolio
C&I Portfolio by IndustryC&I Portfolio by IndustryC&I Portfolio by Industry
Finance and Insurance - Warehouse LendingFinance and Insurance - Warehouse Lending$1,345,314 65 %Finance and Insurance - Warehouse Lending$1,160,157 48 %
Real Estate & Rental Leasing192,323 %
Real Estate and Rental LeasingReal Estate and Rental Leasing245,013 10 %
Finance and Insurance - OtherFinance and Insurance - Other84,528 %Finance and Insurance - Other161,287 %
ManufacturingManufacturing120,619 %
HealthcareHealthcare92,321 %
Arts, Entertainment & RecreationArts, Entertainment & Recreation67,369 %
Television / Motion PicturesTelevision / Motion Pictures65,522 %
Gas StationsGas Stations73,169 %Gas Stations62,347 %
Healthcare71,941 %
Other Retail TradeOther Retail Trade56,132 %
ConstructionConstruction46,795 %
Professional ServicesProfessional Services45,217 %
Wholesale TradeWholesale Trade40,757 %Wholesale Trade43,901 %
Manufacturing34,086 %
Television / Motion Pictures30,002 %
Management of Companies and EnterprisesManagement of Companies and Enterprises37,561 %
Food ServicesFood Services29,371 %Food Services36,593 %
Other Retail Trade28,999 %
Professional Services19,448 %
Educational ServicesEducational Services34,473 %
TransportationTransportation4,739 — %Transportation18,551 %
AccommodationsAccommodations2,200 — %Accommodations8,922 — %
All OtherAll Other114,033 %All Other130,684 %
TotalTotal$2,070,910 100 %Total$2,433,464 100 %

Non-Traditional Mortgage Portfolio ("NTM")
Our NTM loans are included in our SFR mortgage portfolio isand are comprised of three interest-only products: Green Loans, Interest Onlyinterest only loans and a small numberGreen Loans. While we no longer originate SFR loans, we have and may continue to purchase pools of additionalloans that include NTM loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the potential for negative amortization. life of the loan.
As of June 30, 20212022 and December 31, 2020,2021, the NTM portfolioloans totaled $462.6$841.1 million, or 7.7%11.3% of the total gross loan portfolio,loans, and $437.1$635.3 million, or 7.4%8.8% of total loans, respectively. Interest only loans are primarily SFR first mortgage loans that generally have a 30 to 40-year term at the total gross loan portfolio. time of origination and include payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At June 30, 2022 and December 31, 2021, interest only loans totaled $833.6 million and $613.3 million. Green Loans are SFR first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. Green Loans are generally interest only for a 15-year term with a balloon payment due at maturity. At June 30, 2022 and December 31, 2021, Green Loans totaled $7.4 million and $21.9 million.
The total NTM portfolio increased by $25.5$205.8 million, or 5.8%32.4% during the six months ended June 30, 2021.2022. The increase was primarily due to loan purchases, offset by principal paydowns and payoffs. We no longer originate
At June 30, 2022 and December 31, 2021, nonperforming NTM loans however loans were purchased which meet the criteria to be considered NTM loans. NTM loanstotaled zero and $4.0 million.
Non-Traditional Mortgage Performance Indicators
Our risk management policy and credit monitoring include reviewing delinquency, FICO scores, and LTV ratios on nonaccrual status included $5.9 million of Green Loans and $3.4 million of Interest Only loans at June 30, 2021 compared to $4.0 million of Green Loans and $4.7 million of Interest Only loans at December 31, 2020.
The initial credit guidelines for the NTM portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, loan-to-value ("LTV") ratio, property type, occupancy type, loan amount, and geography. Additionally, from an ongoing credit risk management perspective, weportfolio. We also regularly monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for NTMsNTM loans are LTV ratios and FICO scores. We review the NTM loan portfolio at least quarterly, which includes refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models (“AVMs”) to confirm collateral values.
Green Loans, including first and second liens, totaled $30.4 million atAt June 30, 2021,2022, our NTM first lien portfolio had a decreaseweighted average LTV of $2.8approximately 60%. At June 30, 2022, $3.5 million or 8.4% from $33.250% of our $7.0 million at December 31, 2020. The following table presents our Green Loans first lien portfolio at June 30, 2021 byhad FICO scores that were obtained during the quarter ended June 30, 2021, compared to the FICO scores for those same loans that were obtained during the quarter ended December 31, 2020:
By FICO Scores Obtained
During the Quarter Ended
June 30, 2021
By FICO Scores Obtained
During the Quarter Ended
December 31, 2020
Change
($ in thousands)CountAmountPercentCountAmountPercentCountAmountPercent
FICO Score
800+10 $3,184 11.1 %10 $5,143 17.9 %— $(1,959)(38.1)%
700-79923 20,042 69.6 %22 15,974 55.5 %4,068 25.5 %
600-6994,772 16.6 %6,881 23.9 %(1)(2,109)(30.6)%
<600272 0.9 %272 0.9 %— — — %
No FICO526 1.8 %526 1.8 %— — — %
Totals42 $28,796 100.0 %42 $28,796 100.0 % $  %
of 700 or greater.

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Loan-to-Value Ratio
LTV ratio represents estimated current loan to value ratio, determined by dividing the current unpaid principal balance by the latest estimated property value received per our policy. The table below represents our single family residential NTM first lien portfolio by LTV ratio ranges as of the dates indicated:
($ in thousands)GreenInterest OnlyNegative AmortizationTotal
LTV ratio rangeCountAmountPercentCountAmountPercentCountAmountPercentCountAmountPercent
June 30, 2021
< 61%40 $26,526 92.1 %192 $281,970 65.5 %$1,690 100.0 %237 $310,186 67.3 %
61-80%2,270 7.9 %97 144,999 33.7 %— — — %99 147,269 31.9 %
81-100%— — — %— — — %— — — %— — — %
> 100%— — — %3,519 0.8 %— — — %3,519 0.8 %
Total42 $28,796 100.0 %290 $430,488 100.0 %5 $1,690 100.0 %337 $460,974 100.0 %
December 31, 2020
< 61%42 $25,946 82.1 %190 $271,108 67.5 %$2,288 100.0 %240 $299,342 68.7 %
61-80%5,641 17.9 %91 126,281 31.4 %— — — %97 131,922 30.3 %
81-100%— — — %4,251 1.1 %— — — %4,251 1.0 %
> 100%— — — %— — — %— — — %— — — %
Total48 $31,587 100.0 %283 $401,640 100.0 %8 $2,288 100.0 %339 $435,515 100.0 %

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Nonperforming Assets
The following table presents a summary of total nonperforming assets, excluding loans held-for-sale, as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2021
December 31, 2020Amount ChangePercentage Change($ in thousands)June 30,
2022
December 31, 2021Amount ChangePercentage Change
Loans past due 90 days or more still on accrualLoans past due 90 days or more still on accrual$— $728 $(728)(100.0)%Loans past due 90 days or more still on accrual$— $— $— — %
Nonaccrual loansNonaccrual loans51,299 35,900 15,399 42.9 %Nonaccrual loans44,443 52,558 (8,115)(15.4)%
Total nonperforming loansTotal nonperforming loans51,299 36,628 14,671 40.1 %Total nonperforming loans44,443 52,558 (8,115)(15.4)%
Other real estate ownedOther real estate owned3,253 — 3,253 — %Other real estate owned— — — — %
Total nonperforming assetsTotal nonperforming assets$54,552 $36,628 $17,924 48.9 %Total nonperforming assets$44,443 $52,558 $(8,115)(15.4)%
Performing restructured loans (1)
Performing restructured loans (1)
$6,029 $4,733 $1,296 27.4 %
Performing restructured loans (1)
$10,946 $12,538 $(1,592)(12.7)%
Total nonperforming loans to total loans0.86 %0.62 %
Nonaccrual loans to total loansNonaccrual loans to total loans0.60 %0.72 %
Nonperforming loans to total loansNonperforming loans to total loans0.60 %0.72 %
Total nonperforming assets to total assetsTotal nonperforming assets to total assets0.68 %0.46 %Total nonperforming assets to total assets0.47 %0.56 %
ALL to nonperforming loansALL to nonperforming loans147.93 %221.22 %ALL to nonperforming loans211.04 %176.16 %
ACL to nonperforming loansACL to nonperforming loans155.36 %229.91 %ACL to nonperforming loans224.33 %186.82 %
(1) Excluded from nonperforming loans

Loans are generally placed on nonaccrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection. Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where we believe the borrower will eventually overcome those circumstances and repay the loan in full.

Additional interest income of approximately $702$694 thousand and $1.2$1.3 million would have been recorded during the three and six months ended June 30, 2021,2022, had these loans been paid in accordance with their original terms throughout the periods indicated.

Non-performing loans increased $14.7decreased $8.1 million to $51.3$44.4 million as of June 30, 2021,2022, of which $32.0$18.4 million, or 62%41%, relates to loans in a current payment status. The increasedecrease was due mostly to $34.0$11.1 million in payoffs, paydowns, and charge-offs and $6.7 million in loans returning to accrual status, offset by additions of $9.7 million. Of the $9.7 million of loans placed on non-accrual status, including $6.6 million in guaranteed SBA loans that were repurchased and are pending resolution, offset by $19.3 million in cured loans and payoffs. Of the $34.0 million of loans placed on non-accrual status, $23.8$7.2 million, related to SFR loans.

At June 30, 2021,2022, non-performing loans included (i) a legacy relationship$12.4 million commercial and industrial loan acquired in the PMB acquisition, (ii) SBA loans totaling $7.2$10.5 million, thatof which $8.6 million is well-secured by a combination of commercial real estate and SFR properties with an average loan-to-value ratio of 50%, (ii)guaranteed, (iii) SFR loans totaling $21.2 million, (iii) repurchased guaranteed SBA loans of $6.6$7.3 million, and (iv) other commercial loans of $16.3 million.

At June 30, 2021, non-performing assets includes other real estate, consisting of one SFR property, totaling $3.3$13.9 million.

Troubled Debt Restructurings
Loans that we modify or restructure where the debtor is experiencing financial difficulties and makes a concession to the borrower in a below-market change in the stated interest rate, a reduction in the loan balance or accrued interest, an extension of the maturity date, or a note split with principal forgiveness are classified as troubled debt restructurings (“TDRs”). TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition. A workout plan between a borrower and us is designed to provide a bridge for the cash flow shortfalls in the near term. If the borrower works through the near term issues, in most cases, the original contractual terms of the loan will be reinstated.
At each June 30, 20212022 and December 31, 2020,2021, we had 11 and 1318 loans classified as TDRs, with an aggregate balance of $9.1$25.9 million and $9.0$16.7 million. When a loan becomes a TDR, we cease accruing interest, and classify it as nonaccrual until the borrower demonstrates that the loan is again performing. The increase in TDRs during the six months ended June 30, 20212022 was primarily due mostly to one single family residentialmodifying the $12.4 million non-performing commercial and industrial loan totaling $1.8 million.acquired in the PMB acquisition, offset by paydowns and payoffs.
At June 30, 2021,2022, of the 1118 loans classified as TDRs, 810 loans totaling $6.0$10.9 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status. At December 31, 2020,2021, of the 1318 loans classified as TDRs, 1011 loans totaling $4.7$12.5 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status.
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Troubled Debt Restructuring (TDR) Relief: In order to encourage banks to work with impacted borrowers, the CARES Act and U.S. banking regulatory agencies have provided relief from TDR accounting. The main benefits of TDR relief include i) a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; ii) a delinquency status benefit, as the aging of loans are frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and iii) a nonaccrual status benefit as the loans are generally not reported as nonaccrual during the modification period. Refer to "Borrower Payment Relief Efforts" above for additional information regarding CARES Act deferrals.

Allowance for Credit Losses (ACL)
The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables (MEVs)MEVs released by ourthe model provider during June 2021. In contrast to the March 20212022. The published forecasts the assumptions in the June 2021 forecasts generally reflect a more favorable view of the economy (i.e.consider rising inflation, higher GDP growth rates and lower unemployment rates). While the June 2021 forecasts reflect an improving economy with the rollout of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variantsoil prices, ongoing supply chain issues and the ultimate pace of the recovery. Accordingly, our economic assumptionsmilitary conflict between Russia and the resulting ACL level and provision reversal consider both the positive assumptions and potential uncertainties. Ukraine, among other factors.
The ACL also incorporatedincorporates qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in various segments of the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better than or worse than current estimates.
The ACL process involves subjective and complex judgments as well as adjustments for numerous factors including those described in the federal banking agencies' joint interagency policy statement on ALL, which include underwriting experience and collateral value changes, among others.
The allowance for expected credit losses (ACL),ACL, which includes the reserve for unfunded loan commitments, totaled $79.7$99.7 million, or 1.33%1.34% of total loans, at June 30, 2021,2022, compared to $84.2$98.2 million, or 1.43%1.35% of total loans, at December 31, 2020.2021. The $4.5$1.5 million decreaseincrease in the ACL was due primarily to: (i) lower general reserves of $4.4 million fromgrowth in the loan portfolio, mix, including higher balances, offset by improved economic assumptionsunfunded commitments, and asset quality trends, (ii) net charge-offs of $1.3 million, and (iii) other changes inhigher specific reserves of $1.1$1.2 million. Changes in portfolio mix and improved credit quality, in addition to net recoveries of $1.8 million, offset the reserves needed due to growth. The $31.3 million recovery in the first quarter of 2022 from the settlement of a loan previously charged-off in 2019 also resulted in a reversal of provision for credit losses and therefore had no net impact on the ACL. The ACL coverage of non-performing loans was 155%224% at June 30, 20212022 compared to 230%187% at December 31, 2020.2021.
The reserve for unfunded loan commitments was established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required.
The following table provides a summary of components of the allowance for credit losses and related ratios as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2021
December 31, 2020($ in thousands)June 30,
2022
December 31, 2021
Allowance for credit losses:Allowance for credit losses:Allowance for credit losses:
Allowance for loan losses (ALL)Allowance for loan losses (ALL)$75,885 $81,030 Allowance for loan losses (ALL)$93,793 $92,584 
Reserve for unfunded loan commitmentsReserve for unfunded loan commitments3,814 3,183 Reserve for unfunded loan commitments5,905 5,605 
Total allowance for credit losses (ACL)Total allowance for credit losses (ACL)$79,699 $84,213 Total allowance for credit losses (ACL)$99,698 $98,189 
ALL to total loansALL to total loans1.27 %1.37 %ALL to total loans1.26 %1.28 %
ACL to total loansACL to total loans1.33 %1.43 %ACL to total loans1.34 %1.35 %
ACL to total loans, excluding PPP loansACL to total loans, excluding PPP loans1.38 %1.48 %ACL to total loans, excluding PPP loans1.34 %1.39 %

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The following tables provide summaries of activity in the allowance for credit losses for the periods indicated:
Three Months Ended June 30,Three Months Ended June 30,
($ in thousands)($ in thousands)20212020($ in thousands)20222021
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of periodBalance at beginning of period$79,353 $3,360 $82,713 $78,243 $3,888 $82,131 Balance at beginning of period$93,226 $5,405 $98,631 $79,353 $3,360 $82,713 
Loans charged offLoans charged off(886)— (886)— — — Loans charged off(494)— (494)(886)— (886)
Recoveries of loans previously charged offRecoveries of loans previously charged off26 — 26 608 — 608 Recoveries of loans previously charged off1,561 — 1,561 26 — 26 
Net (charge-offs) recoveries(860)— (860)608 — 608 
Net recoveries (charge-offs)Net recoveries (charge-offs)1,067 — 1,067 (860)— (860)
(Reversal of) provision for credit losses(Reversal of) provision for credit losses(2,608)454 (2,154)11,519 307 11,826 (Reversal of) provision for credit losses(500)500 — (2,608)454 (2,154)
Balance at end of periodBalance at end of period$75,885 $3,814 $79,699 $90,370 $4,195 $94,565 Balance at end of period$93,793 $5,905 $99,698 $75,885 $3,814 $79,699 
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Six Months Ended June 30,Six Months Ended June 30,
($ in thousands)($ in thousands)20212020($ in thousands)20222021
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Allowance
for
Loan Losses
Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of periodBalance at beginning of period$81,030 $3,183 $84,213 $57,649 $4,064 $61,713 Balance at beginning of period$92,584 $5,605 $98,189 $81,030 $3,183 $84,213 
Impact of adopting ASU 2016-13(1)
— — — 7,609 (1,226)6,383 
Loans charged offLoans charged off(1,451)— (1,451)(2,076)— (2,076)Loans charged off(725)— (725)(1,451)— (1,451)
Recoveries of loans previously charged offRecoveries of loans previously charged off198 — 198 958 — 958 Recoveries of loans previously charged off33,776 — 33,776 198 — 198 
Net charge-offsNet charge-offs(1,253)— (1,253)(1,118)— (1,118)Net charge-offs33,051 — 33,051 (1,253)— (1,253)
Provision for (reversal of) credit losses(3,892)631 (3,261)26,230 1,357 27,587 
(Reversal of) provision for credit losses(Reversal of) provision for credit losses(31,842)300 (31,542)(3,892)631 (3,261)
Balance at end of periodBalance at end of period$75,885 $3,814 $79,699 $90,370 $4,195 $94,565 Balance at end of period$93,793 $5,905 $99,698 $75,885 $3,814 $79,699 
(1)
Represents
The following table presents a summary of net (charge-offs) recoveries and the impactannualized ratio of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. Asnet charge-offs to average loans by loan class for the periods indicated:
Three Months Ended June 30,
($ in thousands)20222021
Net
(Charge-offs) Recoveries
Average LoansAnnualized (Charge-off) Recovery RatioNet
(Charge-offs) Recoveries
Average LoansAnnualized (Charge-off) Recovery Ratio
Commercial:
Commercial and industrial$1,262 $2,457,281 0.21 %$(477)$1,884,793 (0.10)%
Commercial real estate— 1,213,438 — %— 878,252 — %
Multifamily— 1,457,185 — %— 1,272,841 — %
SBA(136)70,225 (0.77)%(383)269,718 (0.57)%
Construction— 219,029 — %— 162,391 — %
Consumer:
Single family residential mortgage154 1,755,719 0.04 %— 1,277,552 — %
Other consumer(213)93,160 (0.91)%— 23,881 — %
Total loans$1,067 $7,266,037 0.06 %$(860)$5,769,428 (0.06)%
Net recoveries were $1.1 million during the second quarter of 2022, compared to net charge-offs of $860 thousand during the comparable 2021 period. The increase in net recoveries between periods was mainly due to net recoveries within the commercial and industrial portfolio.

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Six Months Ended June 30,
($ in thousands)20222021
Net
(Charge-offs) Recoveries
Average LoansAnnualized (Charge-off) Receovery RatioNet
(Charge-offs) Recoveries
Average LoansAnnualized (Charge-off) Receovery Ratio
Commercial:
Commercial and industrial$32,497 $2,544,351 2.55 %$(997)$1,916,788 (0.10)%
Commercial real estate— 1,267,891 — %— 873,589 — %
Multifamily— 1,398,452 — %— 1,277,812 — %
SBA609 93,062 1.31 %(257)271,029 (0.19)%
Construction— 203,996 — %— 166,571 — %
Lease financing— — — %— — — %
Consumer:
Single family residential mortgage182 1,659,633 0.02 %— 1,244,015 — %
Other consumer(237)95,326 (0.50)%26,188 0.01 %
Total loans$33,051 $7,262,711 0.91 %$(1,253)$5,775,992 (0.04)%
Net recoveries were $33.1 million during the six months ended June 30, 2022, compared to net charge-offs of $1.3 million during the comparable 2021 period. The increase in net recoveries between periods was mainly due to a result$31.3 million recovery from the settlement of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather that theloan previously applied incurred loss methodology.charged-off in 2019.
The following table provides a summary of the allocation of the allowance for loan losses by loan category as well as loans receivable for each category as of the dates indicated:
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)Allowance for Loan LossesLoans Receivable% of
Loans in Category to Total Loans
Allowance for Loan LossesLoans Receivable% of
Loans in Category to
Total Loans
($ in thousands)Allowance for Loan LossesLoans Receivable% of
Loans in Category to Total Loans
Allowance for Loan LossesLoans Receivable% of
Loans in Category to
Total Loans
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$20,156 $2,070,910 34.6 %$20,608 $2,088,308 35.3 %Commercial and industrial$41,413 $2,433,464 32.6 %$33,557 $2,668,984 36.8 %
Commercial real estateCommercial real estate16,424 871,790 14.6 %19,074 807,195 13.7 %Commercial real estate15,742 1,204,414 16.2 %21,727 1,311,105 18.1 %
MultifamilyMultifamily21,403 1,325,770 22.2 %22,512 1,289,820 21.9 %Multifamily15,678 1,572,308 21.1 %17,893 1,361,054 18.8 %
SBASBA3,696 253,924 4.2 %3,145 273,444 4.6 %SBA3,033 92,235 1.2 %3,017 205,548 2.8 %
ConstructionConstruction4,734 150,557 2.5 %5,849 176,016 3.0 %Construction4,255 228,341 3.1 %5,622 181,841 2.5 %
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage9,108 1,288,176 21.5 %9,191 1,230,236 20.9 %Single family residential mortgage12,805 1,832,279 24.6 %9,608 1,420,023 19.6 %
Other consumerOther consumer364 24,350 0.4 %651 33,386 0.6 %Other consumer867 88,223 1.2 %1,160 102,925 1.4 %
TotalTotal$75,885 $5,985,477 100.0 %$81,030 $5,898,405 100.0 %Total$93,793 $7,451,264 100.0 %$92,584 $7,251,480 100.0 %


Servicing Rights
We have retained servicing rights from certain sales of SFR mortgage loans and SBA loans. In the second quarter of 2022, we also purchased mortgage servicing rights from unrelated third parties. Purchased mortgage servicing rights are recorded at the purchase price at the time of acquisition, which approximates the fair value. Subsequent to acquisition, we account for these servicing rights using the amortization method. We utilize a subservicer to service the loans underlying the purchased mortgage servicing rights.

Mortgage servicing rights totaled $24.0 million and $1.3 million at June 30, 2022 and December 31, 2021. We purchased $22.8 million of SFR mortgage servicing rights during the second quarter of 2022. The unpaid principal balance of the loans underlying these purchased servicing rights is approximately $1.73 billion at June 30, 2022 and these loans are not included in our consolidated statements of financial condition.

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The following table provides information regarding activity by loan class in the allowance for loan losses during the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)2021202020212020
ALL at beginning of period$79,353 $78,243 $81,030 $57,649 
Impact of adopting ASU 2016-13(1)
— — — 7,609 
Charge-offs:
Commercial and industrial(500)— (1,065)(1,164)
SBA(386)— (386)(356)
Single family residential mortgage— — — (552)
Other consumer— — — (4)
Total charge-offs(886)— (1,451)(2,076)
Recoveries:
Commercial and industrial23 119 68 149 
SBA— 129 121 
Single family residential mortgage— 488 — 639 
Other consumer— 49 
Total recoveries26 608 198 958 
Net (charge-offs) recoveries(860)608 (1,253)(1,118)
(Reversal of) provision for credit losses - loans(2,608)11,519 (3,892)26,230 
ALL at end of period$75,885 $90,370 $75,885 $90,370 
Average total loans held-for-investment$5,769,428 $5,687,652 $5,775,992 $5,723,094 
Total loans held-for-investment at end of period$5,985,477 $5,627,696 $5,985,477 $5,627,696 
Ratios:
Annualized net charge-offs to average total loans held-for-investment0.06 %(0.04)%0.04 %0.04 %
ALL to total loans held-for-investment1.27 %1.61 %1.27 %1.61 %
(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather that the previously applied incurred loss methodology.

Alternative Energy Partnerships
We invest in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits) and other tax benefits. The investment helps promote the development of renewable energy sources and help lower the cost of housing for residents by lowering homeowners’ monthly utility costs.
As our respective investments in these entities are more than minor, we have significant influence, but not control, over the investee’s activities that most significantly impact its economic performance. As a result, we are required to apply the equity method of accounting, which generally prescribes applying the percentage ownership interest to the investee’s GAAP net income in order to determine the investor’s earnings or losses in a given period. However, because the liquidation rights, tax credit allocations and other benefits to investors can change upon the occurrence of specified events, application of the equity method based on the underlying ownership percentages would not accurately represent our investment. As a result, we apply the Hypothetical Liquidation at Book Value (“HLBV”) method of the equity method of accounting.
The HLBV method is a balance sheet approach whereby a calculation is prepared at each balance sheet date to estimate the amount that we would receive if the equity investment entity were to liquidate all of its assets (as valued in accordance with GAAP) and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses from the equity investment for the period.
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The following table presents the activity related to our investment in alternative energy partnerships for the three and six months ended June 30, 20212022 and 2020:2021:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in thousands)($ in thousands)2021202020212020($ in thousands)2022202120222021
Balance at beginning of periodBalance at beginning of period$23,809 $27,347 $27,977 $29,300 Balance at beginning of period$25,156 $23,809 $25,888 $27,977 
New funding— — — 3,631 
Change in unfunded commitments— — — (3,225)
Cash distribution from investmentsCash distribution from investments(570)(547)(1,108)(1,001)Cash distribution from investments(582)(570)(1,156)(1,108)
Gain (loss) on investments using HLBV methodGain (loss) on investments using HLBV method829 167 (2,801)(1,738)Gain (loss) on investments using HLBV method(1,043)829 (1,201)(2,801)
Balance at end of periodBalance at end of period$24,068 $26,967 $24,068 $26,967 Balance at end of period$23,531 $24,068 $23,531 $24,068 
Unfunded equity commitments at end of periodUnfunded equity commitments at end of period$ $ $ $ Unfunded equity commitments at end of period$ $ $ $ 

Our most recent investment in alternative energy partnerships totaling $3.6 million occurred in March 2020.
During the three months ended June 30, 20212022 and 2020,2021, we recognized gainsnet losses on investment of $829 thousand$1.0 million and $167net gains of $829 thousand. During the six months ended June 30, 20212022 and 2020,2021, we recognized net losses on investment of $2.8$1.2 million and $1.7$2.8 million. The HLBV losses for the six months ended June 30, 2021 and 2020 were largely driven by accelerated tax depreciation on equipment and the recognition of energy tax credits which reduces the amount distributable by the investee in a hypothetical liquidation under the contractual liquidation provisions. From an income tax benefitbenefits perspective, we recognized no investment tax credits during these periods; however, we recorded income tax (benefit) expense related to these investments of $228$(301) thousand and $38$228 thousand for the three months ended June 30, 2022 and 2021 and 2020 and income tax benefit of $770$(347) thousand and $398$(770) thousand for the six months ended June 30, 20212022 and 2020.2021.
For additional information, see Note 12 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.
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Deposits
The following table shows the composition of deposits by type as of the dates indicated:
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
($ in thousands)($ in thousands)Amount% of Total DepositsAmount% of Total DepositsAmount Change($ in thousands)Amount% of Total DepositsAmount% of Total DepositsAmount Change
Noninterest-bearing depositsNoninterest-bearing deposits$1,808,918 29.1 %$1,559,248 25.6 %$249,670 Noninterest-bearing deposits$2,826,599 37.4 %$2,788,196 37.5 %$38,403 
Interest-bearing demand depositsInterest-bearing demand deposits2,217,306 35.7 %2,107,942 34.6 %109,364 Interest-bearing demand deposits2,359,857 31.2 %2,393,386 32.2 %(33,529)
Savings accounts901,334 14.5 %932,363 15.3 %(31,029)
Money market accounts692,390 11.2 %714,297 11.7 %(21,907)
Savings and money market accountsSavings and money market accounts1,622,922 21.4 %1,751,135 23.5 %(128,213)
Certificates of deposit of $250,000 or lessCertificates of deposit of $250,000 or less239,580 3.9 %316,585 5.2 %(77,005)Certificates of deposit of $250,000 or less374,117 4.9 %285,768 3.8 %88,349 
Certificates of deposit of more than $250,000Certificates of deposit of more than $250,000347,016 5.6 %455,365 7.6 %(108,349)Certificates of deposit of more than $250,000375,188 5.0 %220,950 3.0 %154,238 
Total depositsTotal deposits$6,206,544 100.0 %$6,085,800 100.0 %$120,744 Total deposits$7,558,683 100.0 %$7,439,435 100.0 %$119,248 

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Total deposits were $6.2$7.6 billion at June 30, 2021,2022, an increase of $120.7$119.2 million, or 2.0%1.6%, from $6.1$7.4 billion at December 31, 2020. We continue2021 due mostly to focus on growing relationship-basedhigher certificates of deposits strategically augmentedof $242.6 million and noninterest-bearing checking balances of $38.4 million, offset by wholesale funding, as we actively managed down deposit costs in response to the current interest rate environment.lower savings and money market balances of $128.2 million and interest-bearing demand deposits of $33.5 million. Noninterest-bearing deposits totaled $1.81$2.83 billion and represented 29.1%37.4% of total deposits at June 30, 20212022 compared to $1.56$2.79 billion and 25.6%37.5% at December 31, 2020.
During the six months ended June 30, 2021, demand deposits increased by $359.0 million, due to higher noninterest-bearing deposits of $249.7 million and interest-bearing demand deposits of $109.4 million. These increases were offset by decreases in savings accounts of $31.0 million, money market accounts of $21.9 million, and time deposits of $185.4 million.2021.
Brokered deposits were $10.0$133.6 million at June 30, 2021, and $26.2 million2022. There were no brokered deposits at December 31, 2020. The decrease between periods related to maturities of brokered time deposits.2021.
The following table presents the scheduled maturities of certificates of deposit as of June 30, 2021:2022:
($ in thousands)($ in thousands)Three Months or LessOver Three Months Through Six MonthsOver Six Months Through Twelve MonthsOver One YearTotal($ in thousands)Three Months or LessOver Three Months Through Six MonthsOver Six Months Through Twelve MonthsOver One YearTotal
Certificates of deposit of $250,000 or lessCertificates of deposit of $250,000 or less$72,794 $60,317 $71,071 $35,398 $239,580 Certificates of deposit of $250,000 or less$138,342 $63,080 $49,114 $123,581 $374,117 
Certificates of deposit of more than $250,000Certificates of deposit of more than $250,000130,340 145,919 35,881 34,876 347,016 Certificates of deposit of more than $250,000153,956 173,398 30,652 17,182 375,188 
Total certificates of depositTotal certificates of deposit$203,134 $206,236 $106,952 $70,274 $586,596 Total certificates of deposit$292,298 $236,478 $79,766 $140,763 $749,305 

Borrowings
We utilizedutilize FHLB advances to leverage our capital base, to provide funds for lending and investing activities, as a source of liquidity, and to enhance interest rate risk management. We also maintainedmaintain additional borrowing availabilities from Federal Reserve Discount Window and unsecured federal funds lines of credit.
During the six months ended June 30, 2021,2022, FHLB advances decreased $49.4increased $35.6 million, or 9.1%7.5%, to $490.4$511.7 million, net of unamortized debt issuance costs of $5.6$4.3 million, as of June 30, 2021, primarily2022, due to maturitiesan increase in overnight borrowings of term advances of $50.0$35.0 million.
At June 30, 2021,2022, FHLB advances included $85.0$105.0 million in overnight borrowings and $411.0 million in term advances with a weighted average life of 4.53.5 years and weighted average interest rate of 2.53%.
We did not utilize repurchase agreements at June 30, 20212022 or December 31, 2020.2021.
The Bank maintainedmaintains available unsecured federal funds lines with five correspondent banks totaling $210.0 million, with no outstanding borrowings at June 30, 2021.2022.
The Bank also has the ability to perform unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform (AFX)("AFX"). The availability of such unsecured borrowings fluctuates regularly, and are
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is subject to the counterparties discretion and totaled $441.0 million and $196.0$445.0 million at June 30, 20212022 and December 31, 2020.2021. Borrowings under the AFX totaled $125.0$85.0 million and $25.0 million at June 30, 2022 and December 31, 2021.
The holding company maintains a $50.0 million revolving line of credit, which matures on December 19, 2022. We have the option to select paying interest using either (i) Prime Rate or (ii) LIBOR + 1.75%. The line of credit is also subject to an unused commitment fee of 0.40% per annum. Borrowings under the line of credit totaled $13.0 million and zero at June 30, 20212022 and December 31, 2020.2021. The line of credit is subject to certain operational and financial covenants and we were in compliance with these covenants at June 30, 2022.
For additional information, see Note 6 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Long-term Debt
The following table presents our long-term debt as of the dates indicated:
June 30, 2021December 31, 2020
($ in thousands)Par ValueUnamortized Debt Issuance Cost and DiscountPar ValueUnamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025$175,000 $(1,193)$175,000 $(1,291)
4.375% subordinated notes due October 30, 203085,000 (2,253)85,000 (2,394)
Total$260,000 $(3,446)$260,000 $(3,685)
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June 30, 2022December 31, 2021
($ in thousands)Interest
Rate
Maturity
Date
Par
Value
Unamortized Debt Issuance Cost and DiscountPar
Value
Unamortized Debt Issuance Cost and Discount
Senior notes5.25%4/15/2025$175,000 $(910)$175,000 $(1,014)
Subordinated notes4.375%10/30/203085,000 (2,030)85,000 (2,127)
PMB Statutory Trust III, junior subordinated debenturesLibor + 3.40%9/26/20327,217 — 7,217 — 
PMB Capital Trust III, junior subordinated debenturesLibor + 2.00%10/8/203410,310 — 10,310 — 
Total$277,527 $(2,940)$277,527 $(3,141)

At June 30, 2021,2022, we were in compliance with all covenants under our long-term debt agreements.

Liquidity Management
We are required to maintain sufficient liquidity to ensure a safe and sound operation. Liquidity may increase or decrease depending upon availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including both expected and unexpected cash flow needs such as funding loan commitments, potential deposit outflows and dividend payments. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained.
As a result of current economic conditions, including government stimulus in response to the pandemic, we have participated in the elevated levels of liquidity in the marketplace. A portion of the additional liquidity is viewed as short-term as it is expected to be used by clients in the near term and, accordingly, we have maintained higher levels of liquid assets. We have not observed a changereductions in average line usage due to the levels of liquidity in the level of clients' creditmarketplace. We expect to see higher line usage andutilization as the Bank's PPP loans are expectedliquidity moderates to be forgiven over the next 9 to 12 months..historical levels.
Banc of California, N.A.
At June 30, 2021, the Company had borrowing capacity with the Federal Reserve Bank of San Francisco (“Federal Reserve”) of $269.5 million, including the secured borrowing capacity through the Federal Reserve Discount Window and Borrower-in-Custody ("BIC") program. At June 30, 2021, the Bank has pledged certain qualifying loans with an unpaid principal balance of $553.1 million and securities with a carrying value of $8.9 million as collateral for these lines of credit. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were no borrowings under this arrangement for the three and six months ended June 30, 2021.
The Bank's liquidity, represented by cash and cash equivalents and securities available-for-sale, is a product of its operating, investing, and financing activities. The Bank's primary sources of funds are deposits, payments and maturities of outstanding loans and investment securities; sales of loans, and investment securities, and other short-term investmentsinvestments; and funds provided from operations. While scheduled payments from the amortization of loans and investment securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. In addition, the Bank invests excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.
The Bank also generates cash through borrowings.secured and unsecured secondary sources of funds. The Bank mainly utilizes FHLB advances frommaintains pre-established secured lines of credit with the FHLB and the FRB as a secondary sourcesources of liquidity to provide funds for its lending and investment activities and to enhance its interest rate risk and liquidity risk management. At June 30, 2022, we had available unused secured borrowing capacities of $985.4 million from the FHLB and $789.0 million through the Federal Reserve Bank's Discount Window and Borrower-in-Custody (“BIC”) programs. At June 30, 2022 and December 31, 2021, FHLB advances totaled $511.7 million and $476.1 million, net of unamortized debt issuance costs of $4.3 million and $4.9 million. At June 30, 2022, the Bank had pledged certain qualifying loans with an unpaid principal balance of $2.38 billion and securities with a carrying value of $205.5 million.
Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were no borrowings under the FRB's Discount Window and BIC programs at June 30, 2022 and December 31, 2021. At June 30, 2022, the Bank had pledged certain qualifying loans with an unpaid principal balance of $1.01 billion and securities with a carrying value of $123.2 million as collateral for these FRB programs. The Bank may also has additional sources of secondary liquidity through its ability to obtain brokered deposits or useutilize securities sold under repurchase agreements to leverage its capital base as well as a pre-established secured line of credit throughand while it maintains repurchase agreements, there were none outstanding at June 30, 2022 and December 31, 2021. Availabilities and terms on repurchase agreements are subject to the Federal Reserve BIC program. Liquidity management is both a dailycounterparties' discretion and long-term function of business management. Any excess liquidity is typically invested in federal funds orour pledging additional investment securities. On a longer-term basis, the Bank maintains a strategy of investing in various lending products. The Bank uses its sources of funds primarily to meet its ongoing loan and other commitments, and to pay maturing certificates of deposit and savings withdrawals.had unpledged securities available-for-sale aggregating $846.5 million at June 30, 2022.

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In addition, the Bank has additional sources of secondary liquidity through pre-established unsecured fed funds lines with correspondent banks, pre-approved unsecured overnight borrowing lines with various financial institutions through the AFX platform, and our ability to obtain brokered deposits. The availability of unsecured borrowings through the AFX platform fluctuates regularly and is subject to the counterparties' discretion and totaled $445.0 million at June 30, 2022. Borrowings under the AFX platform totaled $85.0 million and $25.0 million at June 30, 2022 and December 31, 2021. At June 30, 2022, the Bank had $210.0 million in pre-established unsecured federal funds lines of credit with correspondent banks. There were no borrowings with these correspondent banks at June 30, 2022 and December 31, 2021.
Banc of California, Inc.
The primary sources of funds for Banc of California, Inc., on a stand-alone holding company basis, are dividends and intercompany tax payments from the Bank, outside borrowing, and ourits ability to raise capital and issue debt securities. Dividends from the Bank are largely dependent upon the Bank's earnings and are subject to restrictions under certain regulations that limit its ability to transfer funds to the holding company. OCC regulations impose various restrictions on the ability of a bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items. Generally, a well-capitalized bank may make capital distributions during any calendar year equal to up to 100 percent of year-to-date net income plus retained net income for the two preceding years without prior OCC approval. However, any dividend paid by the Bank would be limited by the need to maintain its well-capitalized status plus the capital buffer in order to avoid additional dividend restrictions (Refer to Capital - Dividend Restrictions below for additional information). Currently, the Bank does not have sufficient dividend-paying capacity to declare and pay such dividends to the holding company without obtaining prior approval from the OCC under the applicable regulations. During the six months ended June 30, 2021, the Bank paid $12.02022, there were $66.0 million of dividends paid by the Bank to Banc of California, Inc. At June 30, 2021,2022, Banc of California, Inc. had $36.9$25.0 million in cash, all of which was on deposit at the Bank.
On February 10, 2020,March 15, 2022, we announced that our Board of Directors authorized the repurchase of up to $45$75 million of our common stock. The repurchase authorization expiredexpires in February 2021. There were no common stock repurchases duringMarch 2023. During the sixthree months ended June 30, 2021.
2022, common stock repurchased under the program totaled 2,113,176 shares at a weighted average price of $18.38. During the six months ended June 30, 2021,2022, common stock repurchased under the program totaled 2,328,726 shares at a weighted average price of $18.52. As of June 30, 2022, the Company had $31.9 million remaining under the current stock repurchase authorization.
On March 15, 2022 we repurchasedredeemed all outstanding Series E Preferred Stock, and the corresponding depositary shares, each representing sharesa 1/40th interest in a share of ourthe Series D.E Preferred Stock. The aggregate total considerationredemption price for the Series DE Preferred Stock was $1,000 per share (equivalent to $25 per Series E Depositary Share). Upon redemption, the Series E Preferred Stock and the Series E Depositary Shares were no longer outstanding and all rights with respect to such stock and depositary shares purchased was $93.3 million.ceased and terminated, except the right to payment of the redemption price. Also upon redemption, the Series E Depositary Shares were delisted from trading on the New York Stock Exchange. The $3.3$3.7 million difference between the consideration paid and the $89.9$95.0 million aggregate carrying value of the Series DE Preferred Stock was reclassified to retained earnings and resulted in a decrease to net income allocated to common stockholders.stockholders
On a consolidated basis, cash and cash equivalents totaled $163.3$243.1 million, or 2.0%2.6% of total assets at June 30, 2021.2022. This compared to $220.8$228.1 million, or 2.8%2.4% of total assets, at December 31, 2020.2021. The $57.5$14.9 million decreaseincrease was due mainly due to (i) net income of $75.2 million generated during the decreaseyear, (ii) a $108.0 million increase in deposits.FHLB advances and other borrowings, (iii) a $119.2 million increase in deposits, and (iv) net investment securities inflows of $61.6 million from repayments, net of securities purchases, offset by (iv) net loan outflows of $167.3 million from originations net of repayments and loan purchases, (v) the redemption of Series E Preferred Stock of $98.7 million, (vi) payments of common and preferred dividends of $9.1 million , and (vii) repurchases of common stock of $43.2 million.
In December 2021, the holding company entered into a $50.0 million revolving line of credit. The line of credit matures on December 19, 2022. We have the option to pay interest using either (i) Prime Rate or (ii) LIBOR + 1.75%. The line of credit is also subject to an unused commitment fee of 0.40% per annum. At June 30, 2021, we had available unused secured borrowing capacities2022, there were $13.0 million in borrowings under this line of $753.7 million from the FHLB and $269.5 million from the Federal Reserve, as well as $210.0 million from unsecured federal funds lines of credit. We also maintained repurchase agreements of which none were outstanding at June 30, 2021. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and pledging additional investment securities. We also had unpledged securities available-for-sale of $1.32 billion at June 30, 2021. We also have the ability to perform unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform (AFX). The availability of such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled $441.0 million at June 30, 2021. Borrowings under the AFX totaled $125.0 million and zero at June 30, 2021 and December 31, 2020.
We believe that our liquidity sources are stable and are adequate to meet our day-to-day cash flow requirements as of June 30, 2021.2022. However, in light of the ongoing COVID-19 pandemic, we cannot predict at this time the extent to which the pandemic willmay negatively affect our business, financial condition, liquidity, capital and results of operations.

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Commitments and Contractual Obligations
The following table presents our commitments and contractual obligations as of June 30, 2021:2022:
Commitments and Contractual ObligationsCommitments and Contractual Obligations
($ in thousands)($ in thousands)Total Amount CommittedWithin
One Year
More Than One Year Through Three YearsMore Than Three Year Through Five Years
Over Five Years
($ in thousands)Total Amount CommittedWithin
One Year
More Than One Year Through Three YearsMore Than Three Years Through Five Years
Over Five Years
Commitments to extend creditCommitments to extend credit$88,629 $12,345 $54,783 $18,517 $2,984 Commitments to extend credit$234,283 $19,617 $162,078 $21,965 $30,623 
Unused lines of creditUnused lines of credit1,528,218 1,305,615 115,944 63,699 42,960 Unused lines of credit2,000,345 1,720,837 195,198 45,945 38,365 
Standby letters of creditStandby letters of credit8,377 7,956 421 — — Standby letters of credit10,124 9,294 — 830 — 
Total commitmentsTotal commitments$1,625,224 $1,325,916 $171,148 $82,216 $45,944 Total commitments$2,244,752 $1,749,748 $357,276 $68,740 $68,988 
FHLB advancesFHLB advances$496,000 $85,000 $— $311,000 $100,000 FHLB advances$516,000 $105,000 $291,000 $120,000 $— 
Other borrowingsOther borrowings125,000 125,000 — — — Other borrowings98,000 98,000 — — — 
Long-term debtLong-term debt260,000 — — 175,000 85,000 Long-term debt277,527 — 175,000 — 102,527 
Operating and capital lease obligationsOperating and capital lease obligations23,920 4,987 7,613 5,400 5,920 Operating and capital lease obligations38,517 9,005 16,037 9,570 3,905 
Certificates of depositCertificates of deposit586,596 516,322 67,232 3,042 — Certificates of deposit749,305 608,542 138,261 2,502 — 
Total contractual obligationsTotal contractual obligations$1,491,516 $731,309 $74,845 $494,442 $190,920 Total contractual obligations$1,679,349 $820,547 $620,298 $132,072 $106,432 

At June 30, 2021,2022, we had unfunded commitments of $16.1$14.9 million, $5.6$9.4 million, and $2.5$7.9 million for affordable housing fundLIHTC investments, SBIC investments, and other investments, including investments in alternative energy partnerships, respectively.

Capital
In order to maintain adequate levels of capital, we continuously assess projected sources and uses of capital to support projected asset growth, operating needs and credit risk. We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, we perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on our capital base. During the first half of 2022, increases in market interest rates resulted in higher net unrealized losses in our securities portfolio and stockholders’ equity. As market interest rates increase, bond prices tend to fall and, consequently, the fair value of our securities may also decrease. To this end, we may have further net unrealized losses on our securities classified as available–for-sale, which would negatively affect our total and tangible stockholders’ equity.
Regulatory Capital
The Company and the Bank are subject to the regulatory capital adequacy guidelines that are established by the Federal banking regulators. In July 2013, the Federal banking regulators approved a final rule to implement the revised capital adequacy standards of the Basel III and to address relevant provisions of the Dodd-Frank Act. The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. The Company and the Bank became subject to the new rule on January 1, 2015 and certain provisions of the new rule were phased in through January 1, 2019. Inclusive of the fully phased-in capital conservation buffer, the common equity Tier 1 capital, Tier 1 risk-based capital and total risk-based capital ratio minimums are 7.0%, 8.5% and 10.5%, respectively.
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The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:
Minimum Capital RequirementsMinimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands)AmountRatioAmountRatioAmountRatio
June 30, 2021
Banc of California, Inc.
Total risk-based capital$926,650 15.33 %$483,445 8.00 % N/AN/A
Tier 1 risk-based capital768,313 12.71 %362,583 6.00 % N/AN/A
Common equity tier 1 capital673,357 11.14 %271,938 4.50 % N/AN/A
Tier 1 leverage768,313 9.89 %310,848 4.00 % N/AN/A
Banc of California, NA
Total risk-based capital$1,042,549 17.25 %$483,456 8.00 %$604,320 10.00 %
Tier 1 risk-based capital972,134 16.09 %362,592 6.00 %483,456 8.00 %
Common equity tier 1 capital972,134 16.09 %271,944 4.50 %392,808 6.50 %
Tier 1 leverage972,134 12.52 %310,563 4.00 %388,204 5.00 %
December 31, 2020
Banc of California, Inc.
Total risk-based capital$996,466 17.01 %$468,628 8.00 %N/AN/A
Tier 1 risk-based capital840,501 14.35 %351,471 6.00 %N/AN/A
Common equity tier 1 capital655,623 11.19 %263,603 4.50 %N/AN/A
Tier 1 leverage840,501 10.90 %308,555 4.00 %N/AN/A
Banc of California, NA
Total risk-based capital$1,011,587 17.27 %$468,698 8.00 %$585,873 10.00 %
Tier 1 risk-based capital938,346 16.02 %351,524 6.00 %468,698 8.00 %
Common equity tier 1 capital938,346 16.02 %263,643 4.50 %380,817 6.50 %
Tier 1 leverage938,346 12.19 %307,894 4.00 %384,868 5.00 %

On October 30, 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% Fixed-to-Floating Rate Subordinated Notes due 2030, at a public offering price equal to 100% of the aggregate principal amount of the Notes which qualifies as Tier II capital.
Minimum Capital RequirementsMinimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands)AmountRatioAmountRatioAmountRatio
June 30, 2022
Banc of California, Inc.
Total risk-based capital$1,080,107 13.69 %$631,119 8.00 % N/AN/A
Tier 1 risk-based capital890,341 11.29 %473,339 6.00 % N/AN/A
Common equity tier 1 capital890,341 11.29 %355,005 4.50 % N/AN/A
Tier 1 leverage890,341 9.58 %371,732 4.00 % N/AN/A
Banc of California, NA
Total risk-based capital$1,225,571 15.54 %$630,958 8.00 %$788,697 10.00 %
Tier 1 risk-based capital1,136,569 14.41 %473,218 6.00 %630,958 8.00 %
Common equity tier 1 capital1,136,569 14.41 %354,914 4.50 %512,653 6.50 %
Tier 1 leverage1,136,569 12.27 %370,667 4.00 %463,334 5.00 %
December 31, 2021
Banc of California, Inc.
Total risk-based capital$1,140,480 14.98 %$609,062 8.00 %N/AN/A
Tier 1 risk-based capital955,747 12.55 %456,796 6.00 %N/AN/A
Common equity tier 1 capital860,841 11.31 %342,597 4.50 %N/AN/A
Tier 1 leverage955,747 10.37 %368,610 4.00 %N/AN/A
Banc of California, NA
Total risk-based capital$1,195,050 15.71 %$608,740 8.00 %$760,925 10.00 %
Tier 1 risk-based capital1,110,767 14.60 %456,555 6.00 %608,740 8.00 %
Common equity tier 1 capital1,110,767 14.60 %342,416 4.50 %494,601 6.50 %
Tier 1 leverage1,110,767 12.06 %368,306 4.00 %460,382 5.00 %
Dividend Restrictions
Payment of dividends by the Company are subject to guidance provided by the Federal Reserve. That guidance provides that bank holding companies that plan to pay dividends that exceed net earnings for a given period should first consult with the Federal Reserve. To the extent future quarterly dividends exceed quarterly net earnings, payment of dividends in respect of the Company’s common and preferred stock will be subject to prior consultation and non-objection from the Federal Reserve.
Our principal source of funds for dividend payments is dividends received from the Bank. Federal banking laws and regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, in the case of the Bank, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. Accordingly, any dividend granted by the Bank would be limited by the need to maintain its well capitalized status plus the capital buffer in order to avoid additional dividend restrictions. As described above, any near term dividend by the Bank will require OCC approval. During the three and six months ended June 30, 2021,2022, the Bank paid zero$50.0 million and $12.0$66.0 million in dividends to Banc of California, Inc.
During both the three and six months ended June 30, 2021,2022, we declared and paid dividends on our common stock of $0.06 and $0.12 per share totaling $3.0$3.7 million and $6.0$7.4 million in addition to dividends on our preferred stock totaling $1.7 millionzero and $4.9$1.7 million.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities.
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The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.
How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.
We maintain both a management asset/liability committee (“Management ALCO”), comprised of select members of senior management, and a joint asset/liability committee of the Boards of Directors of the Company and the Bank (“Board ALCO”, together with Management ALCO, “ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs, while management monitors adherence to those guidelines with oversight by the ALCOs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our net present value of equity analysis.
In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we evaluate various strategies including:
Originating and purchasing adjustable rate mortgage loans,
Selling longer duration fixed or hybrid mortgage loans,
Originating shorter-term consumer loans,
Managing the duration of investment securities,
Managing our deposits to establish stable deposit relationships, and grow noninterest-bearing deposits which tend to have a lower expectation of yield,
Using FHLB advances and/or certain derivatives such as swaps to align maturities and repricing terms, and
Managing the percentage of fixed rate loans in our portfolio.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our interest rate risk position within the asset/liability tolerance set forth by our Board of Directors.
As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution’s existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity.

Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income
Interest rate risk results from our banking activities and is the primary market risk for us. Interest rate risk is caused by the following factors:
Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;
Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity;
Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and
Basis risk - changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate and London Interbank Offered Rate.
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Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Management of our interest rate risk is overseen by the Board ALCO. Board ALCO delegates the day to day management of interest rate risk to the Management ALCO. Management ALCO ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our interest rate risk program. Board ALCO reviews the results of our interest rate risk modeling quarterly to ensure that we have appropriately measured our interest rate risk, mitigated our exposures appropriately
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and any residual risk is acceptable. In addition to our annual review of the Asset Liability Managementour asset liability management policy, our Board of Directors periodically reviews the interest rate risk policy limits.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic repricing characteristics of our assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve (“Rate Shock”). We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled utilizing various assumptions for assets, liabilities, and derivatives for 12 and 24 months.derivatives.
EVE is a cash flow calculation that takesmeasures the presentperiod end market value of all asset cash flows and subtractsassets minus the presentmarket value of all liability cash flows. This calculation is used for asset/liabilities. Asset liability management and measuresuses this value to measure the changes in the economic value of the bankBank under various interest rate scenarios. TheIn some ways, the economic value approach provides a comparatively broader scope than the net income volatility approach since it captures all anticipated cash flows.
The balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our net interest margin, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities. Conversely, the balance sheet is considered “liability sensitive” when an increase in short-term interest rates is expected to compress our net interest margin, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.
At June 30, 2021,2022, our interest rate risk profile reflects an “asset sensitive” position. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary from those predicted by our model.
The following table presents the projected change in the Bank’s economic value of equity at June 30, 20212022 and net interest income over the next twelve months, that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change:
Change in Interest Rates in Basis Points (bps) (1)
Change in Interest Rates in Basis Points (bps) (1)
($ in thousands)($ in thousands)Economic Value of EquityNet Interest Income($ in thousands)Economic Value of EquityNet Interest Income
AmountAmount ChangePercentage ChangeAmountAmount ChangePercentage ChangeAmountAmount ChangePercentage ChangeAmountAmount ChangePercentage Change
June 30, 2021
June 30, 2022June 30, 2022
+200 bps+200 bps$1,531,420 $133,707 9.6 %$250,054 $10,748 4.5 %+200 bps$1,724,973 $53,059 3.2 %$355,783 $7,186 2.1 %
+100 bps+100 bps1,470,726 73,013 5.2 %243,673 4,367 1.8 %+100 bps1,702,549 30,635 1.8 %352,079 3,482 1.0 %
0 bps0 bps1,397,713 239,306 0 bps1,671,914 348,597 
-100 bps-100 bps1,292,805 (104,908)(7.5)%233,437 (5,869)(2.5)%-100 bps1,592,289 (79,625)(4.8)%324,877 (23,720)(6.8)%
-200 bps -200 bps1,478,120 (193,794)(11.6)%306,040 (42,557)(12.2)%
(1)Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.
We believe we are well positioned to benefit from the current cycle of rising interest rates. Due to the transformation of the franchise to our relationship-based banking model, with higher percentages of noninterest-bearing deposits and variable rate commercial loans, our one year gap ratio, which compares the percentage of earning assets that are scheduled to mature or reprice within one year to the percentage of rate sensitive term liabilities that are scheduled to mature or reprice within one year, has increased since December 31, 2019. At June 30, 2022, our one year gap ratio stood at 30%. While this is only one measure of asset sensitivity, we expect to see some expansion in our net interest margin as short-term rates increase.
As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the table.
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Interest rate risk is the most significant market risk affecting us. Other types of market risk, such as foreign currency exchange risk and commodity price risk, infrequentlydo not arise in the normal course of our business activities and operations.

ITEM 4 - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Act) as of June 30, 20212022 was carried out under the supervision and with the participation of the Company’s Principal Executive Officer, Principal Financial Officer and other members of the Company’s senior management. The Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, 2021,2022, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s management (including the Principal Executive Officer and Principal Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the three months ended June 30, 20212022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
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PART II — OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
From time to time we are involved as plaintiff or defendant in various legal actions arising in the normal course of business.
On April 2, 2019, the first The outcome of three shareholder derivativesuch legal actions Gordon v. Benett, No. 8:19-cv-621, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Gordon action asserts claims for breach of fiduciary duty against Halle J. Benett, Jonah Schnel, Jeffrey Karish, Robert Sznewajs, Eric Holoman, Chad Brownstein, Steven Sugarman, Richard Lashley, Douglas Bowers and John Grosvenor. On June 10, 2019, a second shareholder derivative action, Johnston v. Sznewajs, No. 8:19-cv-01152, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Johnston action asserts claims for breach of fiduciary duty and unjust enrichment against Robert Sznewajs, Jonah Schnel, Halle Benett, Richard Lashley, Steven Sugarman, John Grosvenor, Chad Brownstein, Jeffrey Karish and Eric Holoman. On June 18, 2019, a third shareholder derivative action, Witmer v. Sugarman, No. 19STCV21088, was filed against current and former officers and directors of Banc of California, Inc. in Los Angeles County Superior Court. The Witmer action asserts claims for breach of fiduciary duty, unjust enrichment and corporate waste against Steven Sugarman, Ronald Nicolas, Jr., Robert Sznewajs, Chad Brownstein, Halle Benett, Douglas Bowers, Jeffrey Karish, Richard Lashley, Jonah Schnel, Eric Holoman and Jeffrey Seabold. On June 24, 2019, the Witmer Action was removed to the United States District Court for the Central District of California and assigned docket number 2:19-cv-5488. On September 23, 2019, the Court, ordered that the Gordon, Johnston, and Witmer actions are consolidated for all purposes, including pre-trial proceedings and trial, and the matter was captioned timing of ultimate resolution are inherently difficult to predict. In re Bancthe opinion of California Inc. Stockholder Derivative Litigation, No. SA CV 19-621. On November 22, 2019, plaintiffs filedmanagement, based upon information currently available to us, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a consolidated complaint.
In general,material adverse effect on the consolidated complaint alleges that our board wrongfully refused demands that the plaintiffs made to our board of directors that we should initiate litigation against the various current and former officers and directors based on their alleged role in the purported concealment of the Company's alleged relationship with Jason Galanis and variousCompany’s financial statements made by the Company alleged to be false and misleading. The plaintiffs seek an unspecified amount of damages to be paid by the named defendants to the Company, adoption of corporate governance reforms, and equitable and injunctive relief.
On April 5, 2021, the parties informed the Court that they had reached agreement on a Memorandum of Understanding to resolve the action and hoped to be able to file a Stipulation of Settlement within 90 days. The proposed settlement, which requires Court approval, requires only governance changes by the Company and does not contain a monetary component except for a potential award of attorneys’ fees. On July 8, 2021, the Court stayed the time for the Company to respond to the consolidated complaint and ordered the parties to file a Joint Status Report by August 6, 2021 if a Motion for Preliminary Approval of a settlement has not been filed by that time. The parties are currently negotiating the amount of attorney’s fees, if any, that the Company will cause its insurance carriers to pay to counsel for plaintiffs as part of the settlement that is being negotiated.

or operations.
ITEM 1A - RISK FACTORS
There have been no material changes to the risk factors that appeared under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.

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ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Purchase of Equity Securities by the Issuer
($ in thousands, except per share data)Total Number of SharesAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced PlansTotal Number of Shares (or Approximate Dollar Value) That May Yet be Purchased Under the Plan
Common Stock:
From April 1, 2021 to April 30, 202133,505 $18.04 — $— 
From May 1, 2021 to May 31, 20212,212 $17.51 — $— 
From June 1, 2021 to June 30, 20216,184 $18.35 — $— 
Total41,901 $18.06  
Preferred Stock (Depositary Shares):
From April 1, 2021 to April 30, 2021— $— — — 
From May 1, 2021 to May 31, 2021— $— — — 
From June 1, 2021 to June 30, 2021— $— — — 
Total $   

Purchase of Equity Securities by the Issuer
($ in thousands, except per share data)Total Number of SharesAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced PlansApproximate Dollar Value of Shares That May Yet be Purchased Under the Plan
Common Stock:
From April 1, 2022 to April 30, 20221,137,491 $18.68 1,108,657 $50,000 
From May 1, 2022 to May 31, 2022401,522 $18.72 400,683 $42,500 
From June 1, 2022 to June 30, 2022606,407 $17.62 603,836 $31,861 
Total2,145,420 $18.39 2,113,176 
During the three and six months ended June 30, 2021,2022, purchases of shares of common stock related to shares purchased under our stock repurchase program and shares surrendered by employees in order to pay employee tax liabilities associated with vested awards under our employee stock benefit plans. There were no
On March 15, 2022, we announced a repurchase program of up to $75 million of our common stock. The repurchase authorization expires in March 2023. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of common stock during the three months ended June 30, 2021 related to the Company's previously announced stock repurchase program.factors including price, trading volume, corporate and regulatory requirements and market conditions.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable
ITEM 5 - OTHER INFORMATION
None



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ITEM 6 - EXHIBITS
3.1
3.2
10.1
31.1
31.2
32.0
101.0The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 20212022 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BANC OF CALIFORNIA, INC.
Date:August 6, 20218, 2022/s/ Jared Wolff
Jared Wolff
President/Chief Executive Officer
(Principal Executive Officer)
Date:August 6, 20218, 2022/s/ Lynn M. Hopkins
Lynn M. Hopkins
Executive Vice President/Chief Financial Officer
(Principal Financial Officer)
Date:August 6, 20218, 2022/s/ Mike SmithDiana Hanson
Mike SmithDiana Hanson
Senior Vice President/Chief Accounting Officer
(Principal Accounting Officer)

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